PENSIONSANDSAVINGS.COM

28 February 2017

• Triple lock will lead to extra unfair rises in State Pension Age
•  Work and Pensions Select Committee is right to call for earnings and inflation link instead of triple lock
•  Continually raising State Pension age disadvantages vulnerable older people
•  Politicians hide behind triple lock but it does not protect pensioners properly anyway
•  Keeping triple lock in future gives more money to better off and younger pensioners

Raising State Pension Age disadvantages vulnerable groups: Raising the state pension age entails significant unfairnesses that have been underplayed or under-recognised by policymakers. Recent furore over women’s State Pension Age increases highlights the problems this can cause. The state pension age has been increasing because of rises in average life expectancy, however there are huge variations in life expectancy across the country. Those who live in certain regions, people with heavy manual labour occupations, dangerous jobs or on low pay usually have lower life expectancy than the average, so it seems unfair to keep raising the age at which they can start taking their state pension, just because the ‘average person’ is living longer. There is no provision in the National Insurance pension system to recognise lower life expectancy or serious ill-health.

WPSC report suggests abandoning triple lock, so State Pension Age rises more slowly: The Work and Pensions Select Committee has commissioned an IFS report that identifies the problems caused by pressure from keeping the triple lock on State Pension Age rises. https://www.ifs.org.uk/publications/8942 . I believe we have been increasing State Pension Age without thinking about more nuanced and fairer ways of managing the costs of National Insurance pensions and the WPSC report is a helpful addition to the debate.

Yes, Government must protect pensioners: Of course it is important to protect pensioner incomes. However, the triple lock is actually a political construct and fails to offer proper protection. It promises to increase just two parts of the hugely complicated State Pension so that they are guaranteed to rise in line with the highest of earnings, prices or 2.5% under the triple lock. There is no economic or social rationale for this system, the 2.5% is not related to any economic variables and is politically motivated. The longer the triple lock stays in place, the more disadvantaged those who are not covered will become and the greater the pressure to increase State Pension age even further.

Triple lock does not properly protect oldest and poorest pensioners: The only two elements covered by the triple lock are Basic State Pension (around £120pw and received by older pensioners) and the new State Pension (around £160pw but only available to the youngest pensioners). Therefore, the oldest and poorest pensioners are not properly protected. Pension Credit for the poorest pensioners is only linked to rises in earnings. The State Second Pension, Earnings Related State Pension, disability, war veterans’ and widows’ benefits, deferred increases and carers’ benefits are all only linked to rises in prices.

Triple lock has been used to cover up failures in other pension policy areas: Too often, when people complain to MPs about pension problems, the official reply is that the Government has the triple lock so it is unquestionably looking after pensioners properly. This is politically convenient but lazy policymaking and is not being honest with the population.

Keeping triple lock means higher State Pension Age rises which compound unfairness: The Work and Pensions Select Committee’s analysis, done by the respected Institute for Fiscal Studies, confirms that keeping the triple lock for future years after 2020 will cause unfair extra rises in State Pension Age. This is not the best way to manage pension policy in a country with large variations on life expectancy and work history.

 It’s time to consider better approaches to managing state pension costs than just keeping triple lock and increasing state pension age: Government must consider how to manage State Pension costs more fairly than just continually increasing the State Pension age, which unfairly penalises people with lower life expectancy and long working lives.

Consider other factors than just chronological age: Realising the inefficiency and unfairness of the triple lock, and the problems created by continually increasing state pension age, can help improve the operation of state pension policy in future. Those who are in poor health, have much lower life expectancy or have had very long working lives may need pensions sooner. Making them wait longer before they can get any money at all will feel unfair.

Consider contribution record and flexible age range: A fairer uprating system than the triple lock is needed, that does not penalise the older and poorer pensions. I hope the Cridland Review will be making recommendations in this area. For example, Government should consider perhaps extending the number of years of National Insurance required for a full State Pension, as well as more flexible range of ages than just one starting age. Such changes would help the more vulnerable groups more effectively than the current system.