Tomorrow’s earnings data could mean State Pension rises by 8% next year – but that’s not the fault of the triple lock
- Earnings inflation figures released tomorrow likely to indicate 8% rise in State Pension.
- This will reflect the need to protect State Pensions, not the triple lock itself.
- Chancellor is right to hint that it’s time to review state pension protection – just sticking with current triple lock does not give pensioners the reassurance they need.
- Current ‘triple lock’ increases only two bits of State Pensions – but poorest pensioners are excluded and youngest get more protection.
Earnings figures tomorrow expected to show an increase of around 8% and are part of triple lock: Figures to be released tomorrow are expected to provide the basis for next years’ State Pension increase. After August earnings data showed earnings rose by 8.2%, it is likely that the three months’ rise in seasonally adjusted pay growth from July to September, which is the official measure used in the ‘triple lock’, will show a similar rise.
Earnings and price inflation element of triple lock will be much higher than 2.5%: Unless the CPI figure for the year to September is even higher than this, which is not anticipated, the earnings numbers tomorrow will be used for State Pension uprating. Either way, the 2.5% part is not relevant and a double lock would achieve the same outcome, based on best of either earnings or price rises. So the much-vaunted triple lock is rather redundant.
Chancellor has hinted that triple lock may be revised after next year – but it is vital to still protect State Pensions properly: I do understand the Chancellor wanting to look again at the triple lock, but he must not think for one moment that there is any justification for failing to protect the state pension.
Warnings of State Pensions being unaffordable are not true: An 8% rise in the Basic State Pension would see it increase to £168.70 a week – or around £8770 a year. This is what many pensioners have to live on, with very little or no other income. For younger pensioners, an 8% rise in the new State Pension would take it to just over £220 a week. These are extremely low incomes to expect someone to live on, but they are part of a pension system deliberately designed to pay only a low basic state pension, which will be topped up by private and employer pensions or other savings, for which enormously generous incentives are provided by taxpayers each year. It’s just nonsense to say Britain can’t ‘afford’ to protect our state pension – one of the lowest in the world – and on which millions of pensioners – especially women – rely for their retirement security.
Reform of triple lock is overdue and could ensure better protection for poorest: There are two aspects of the triple lock that make no sense in social policy terms. Firstly, the 2.5% part has no economic relevance. (If inflation and earnings growth are only 1%, why should state pensions rise by 2.5%?) Also, the triple lock does not actually protect the poorest and oldest pensioners because it is not applied to Pension Credit. A proper pension protection policy would provide the best protection to the pensioners who need it most, but the triple lock does not. Since the new State Pension was introduced in 2016, the triple lock has been applied to the full new State Pension currently £203.85 a week, but this is only paid to the younger pensioners who are below their early-seventies, whereas everyone else has just the old Basic State Pension currently £156.20 a week, triple-locked. The Pension Credit is not triple locked at all, nor are the other parts of the old State Pension system such as SERPS and S2P. A promise to properly protect the same basic amount of state pension for everyone would be much fairer and dropping the 2.5% would also reduce the long-term spending forecasts for state pensions in the public accounts.
A review of the triple lock is overdue, investigating better ways to save money than just cutting State Pensions, or raising pension age, e.g. requiring 45 years for a full pension: The triple lock debate is a political one, and politicians have used it as a smokescreen to suggest they support pensioners. The totemic status it receives has resulted in voters believing it demonstrates wonderful concern for pensioners, but in reality it is just a political expedient. Indeed, it was even dropped last year, but has retained its holy grail aura. It is not the best way to try to look after older generations and has led to calls for cost-cutting, dropping the uprating, or continuing to increase the starting age, in order to control rising costs. This would be hugely damaging to millions of older citizens. However, if cost control is considered important, there are better policies than just cutting the protection for our already very low state pension, or pushing pension age up all the time. For example, increasing the number of years of NI needed for a full pension. At the moment, you only need 35 years – why not 45? Those with fewer years can pay extra to add more, perhaps if they haven’t lived and worked here for their whole life. That would save money without damaging the value of our already pathetically low state pension.