From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

    MPs vote to remove promised protection for pensioners

    MPs vote to remove promised protection for pensioners

    • MPs missed an opportunity to restore trust and instead voted to push more pensioners into poverty.   
    • Government reasons to drop earnings protection for State Pensions and Pension Credit do not stand up to scrutiny.   
    • State Pensions would be higher next year if the triple lock had not been applied and only earnings had been used, but pensioners are told they have been protected! 

    MPs had a chance to restore some public confidence in their integrity. Sadly, they missed the opportunity and, instead, voted to reject the compromise proposals from the House of Lords. Government will now knowingly plunge more pensioners into poverty. They used the excuse that the cost of increasing State Pensions in line with average earnings – as British law required – was too high, so they had to rip up their triple lock Manifesto pledge to protect pensioners and offer only a 3.1% increase, which reflects the September cpi inflation number, that they must know is too low to reflect rising living costs as inflation is forecast to reach well over 4% next year.

    The vote also removed the legally required earnings uprating for Pension Credit. This means-tested benefit is relied on by the poorest pensioners to afford their basic living costs. This has never been protected by the triple lock and the number of pensioners in poverty has been rising in recent years. By removing the earnings protection from them too, MPs have weakened the safety net which has been relied on. Again on the ground of cost.

    Make no mistake, this is a real terms cut in the UK State Pension – which is the lowest in the developed world. Can one of the world’s richest countries really justify cutting State Pensions, as inflation takes off?

    Removing the triple lock earnings protection will undoubtedly increase hardship. The Government says it’s only for one year. Well, that is scant comfort to millions of elderly pensioners relying principally or entirely on State payments to support their retirement spending. And what a year to choose to do this! Most elderly citizens don’t have spare money stashed behind the sofa to see them through.  Pensioners should not be short-changed like this and Manifesto commitments should not be abandoned lightly.  Sadly, the Commons passed this Bill in a couple of hours, with little debate.

    The Government’s arguments to try to justify its position do not stand up to scrutiny. Here are explanations for why they are wrong.

    1. This is only for one year. For the elderly pensioners in their 90s who are the very poorest, cutting their pension benefits in real terms for one year could be for the rest of their natural life. What are they supposed to live on as their bills for heating, food and other basic essentials are already rising sharply?
    2. The 8.3% earnings rise is distorted by the pandemic and artificially high, so it shouldn’t be used. It is true that 8.3% is impacted by the pandemic, however the Lords allowed for this figure to be adjusted to remove the base and compositional amendments effects of the Covid measures last year.
    3. The DWP says it cannot come up with a ‘robust’ alternative figure. This strains credulity beyond the limit of reason. With so many statistical experts employed in the DWP and Treasury and with alternative figures having been put forward by ONS and OBR, all the Government would need to do would be to choose a figure that can be justified as ‘rational’. A Judicial Review would need to assert that the adjusted figure is irrational.  The DWP is saying it cannot produce a number that would be universally agreed. That is not needed, should the Government really wish to protect pensioners as promised.
    4. State Pensions were increased by 2.5% last year, when earnings fell by 1%, so increasing by earnings this year would be unreasonable. This argument itself is disingenuous. Because pensions were increased by the promise made in 2019, pensioners should not be ‘punished’ by having their protection removed for one year now. The truth is very different. Indeed, if the DWP had just stuck to an earnings link in both years, the State Pension would be higher next year than is currently planned.
    5. Pensioners have benefited from the triple lock overall.  This is not true in relation to the current decision.  In fact, using earnings uprating would give an average 3.55% over two years, while Government  proposes just 2.8% two year average.  The planned change in State Pension over the two years (a 1% fall followed by 8.3% rise) averages out to a rise of 3.55% a year, while using 2.5% last year and just 3.1% next year, is an average of only 2.8% over the two years. Pensioners are clearly being short-changed in the middle of a cost of living crisis, with official estimates that inflation will rise to above 4% and possibly well over 5%.
    6. The Government is ensuring UK pensioners are still being protected. This is not true, especially as inflation is taking off and the UK State Pension is the lowest in the developed world. Pensioners in this country are being impoverished further.  Only those pensioners who have other income will actually have a chance of being protected.  Those depending on the State are being left poorer.
    7. The Chancellor says the 8.3% will cost over £5billion and is unaffordable. This argument is not tenable because the Budget announced tax cuts for alcohol, bank levies, fuel duty and internal flights, among many other things. This is therefore a choice being made, to take money away from State Pensions in order to help fund tax cuts elsewhere.
    8. The Government is looking after the poorest pensioners with a range of benefits. For those in later life, future intentions do not pay their bills.  This change will increase the number of pensioners in poverty in this country.  There are already two million pensioners living below the poverty line, and a million in extreme fuel poverty. This decision will worsen those numbers further. Far from protecting pensioners, this measure will force more into hardship at the end of their lives.
    9. It is not right to make younger generations pay for higher pensions for older people. As well as being a disingenuous argument, and dangerously worsening inter-generational tensions, this argument undermines the entire social contract on which our National Insurance system has been based since the 1940s. Workers pay contributions during their life for an old age insurance that will provide them with a basic pension in retirement.  That is not funded, so it is inevitable that those in work will support those in retirement (or unemployed or disabled and so on). To argue that older people can’t expect to be supported adequately, is suggesting our National Insurance system is a sham.  An unfunded system inevitably requires today’s workers and employers to pay for current pensioners.
    10. The Government is already spending well over £100billion so pensioners should not expect more than is being offered. This argument is the most worrying.  With an aging population, rising numbers of pensioners are going to cost far more in future and that should always have been planned for. Pensioners seem an easy target to raid, but this is undermining the entire fabric of our national contract.

    Make no mistake, this is a real terms cut in the UK State Pension – which is the lowest in the developed world. Can one of the world’s richest countries really justify cutting State Pensions, as inflation takes off?

    Removing the triple lock earnings protection will undoubtedly increase hardship. The Government and MPs had a chance to think again, but they chose not to. Pensioners deserve much better.

    4 thoughts on “MPs vote to remove promised protection for pensioners

    1. It’s a shocking state of affairs for the poorest. Having contributed to society & the economy of the country during their working lives, pensioners are now considered expendable & not worth a reasonable State pension to feed, clothe & warm themselves. This government is making many voters unhappy with much that they are doing to our social infrastructure & this is the icing on the cake. They dismiss the grey vote at their peril

    2. The MP’s accept their inflation protected pensions including the long serving ones who get full service inflation protection whist the steel workers are driven into poverty

    3. what a sham debate in the commons-on bbc parliament i counred less than 20 members a disgrace-so that is what they think of pensioners!
      only person who stood up was john mcdonald -labour-were was the tories!
      As a lifelong Conservative i am appealed by Tory mps over this-what they spend on a meal out is what many pensioners live on in a week-the governmeht will suffer massively in the election and serve them right-i will not be voting Conservative at the election-this was a total injustice
      Neil and Ruth Williams

    4. Why are pensioners expected to live on less than the minimum wage. We have contributed for 50 years paying our taxes and National insurance contributions to be expected to live on a very low pension one of the lowest. MPs should hang there heads in shame especially when they are breaking the rules themselves to rake in extra money. This country is not a great place to grow old in after a lifetime of hard work. It’s absolutely disgraceful.

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