PENSIONSANDSAVINGS.COM

• Glad to see the Government committing to protect the State Pension for next year as many pensioners continue to battle cost of living crisis.
  
• But the real decision is not about ‘triple lock’ as the 2.5% is irrelevant – it’s a double lock that’s important.
  
• It’s important for millions of pensioners especially women relying wholly on State Pensions, to have their meagre State Pension safeguarded.
  

Government is right to commit to protecting pensioners again next year: In the middle of a cost of living crisis, pensioners must not be abandoned – especially as the UK state pension is so low. Pensioner protection is a political choice about spending priorities. It is also a matter of morality and social responsibility. Our welfare state is based on people working and contributing to society for most of their lives, with their contributions assuring them of a basic pension – not a fortune, but enough to enable them to afford essential bills in exchange, when they are too old to continue.

There are some well-off pensioners but millions rely on the old Basic State Pension of under £9000 a year: We probably all know many pensioners with decent incomes or other assets to supplement their state pension. But millions of today’s pensioners – including large numbers of women – had no chance to build private pensions when they were younger. They are totally dependent on the national insurance State Pension, to which they have often contributed for decades. The old Basic State Pension, even after a 10.1% rise this year, is just over £8,000 a year – not many people could live decently on this for the rest of their lives.

Pensioners cannot earn more in future to make up for low incomes now: Older generations have been assured, by successive Prime Ministers and opposition parties, that their small state pensions will be protected. They can’t go out and earn more, many of them have little else to live on.

State Pensions are very low: Even after the latest increase, the Basic State Pension, which is paid to pensioners in their seventies and beyond is only around £8,000 a year. Younger pensioners’ who reached pension age since 2016, have a full new State Pension that is just over £10,000 a year. These payments are hardly a king’s ransom.

The ‘triple lock’ is a powerful political trick, but is not rational economic or social policy: The politics of the triple lock – which promises to raise State Pensions the highest of earnings, price inflation, or 2.5% – has been used as a totemic symbol of a political party’s commitment to millions of pensioners. However, this is a political trick, which defies economic or social logic. There is no rationale for the 2.5% figure and it is redundant now anyway as both prices and earnings are rising by far more.

The poorest, oldest pensioners are not properly protected by the triple lock which gives more to those under age 72: The complexity of State Pensions has allowed the Government to get away with applying the triple lock in a most unfair way. Instead of helping the poorest pensioners who live on Pension Credit which is not included in the triple lock promise, the under 72’s, who reached State Pension Age after April 2016, have thousands of pounds a year more State Pension covered. This is because the triple lock only applies to two parts of the State Pension system – the full new State Pension (currently £10,600 a year) and just the old Basic State Pension (just over £8,000 a year). All the additional pension elements (such as SERPS, S2P, Deferred Payments) and Pension Credit are excluded. Any rational policy would give the top level of protection to the oldest and poorest, but the triple lock does not do so.

Double lock would make more sense – best of earnings or price inflation: Ensuring State Pensions are protected is vital, however the 2.5% part could be dropped now as it adds to the long-term costs and is irrelevant. Millions of older citizens still rely wholly on their State Pension for their retirement income and, as the UK already pays far less than most other countries, these pensions should be fully protected to avoid returning to an era of rising pensioner poverty. However, this should not be about honouring the triple lock. The important issue is to ensure pensioners who have worked or contributed to National Insurance for decades, are not short-changed with new and old state pensioners, as well as the poorest, receiving at least equal protection.

Politicians should be honest about triple lock not working properly: The politicians who hide behind the triple lock, to pretend they care about protecting pensioners, are misleading the public needlessly. Since 2016, it is an increasingly flawed construct. It adds long-term costs and increases pressure to raise state pension age, which disadvantages those who have contributed for more than 50 years and are too ill to work. Explaining this will require political honesty, telling the public why it is outdated but also reassuring them that they will continue to have their State payments protected in future.