AAT urges govt to scrap state pension triple lock amid Covid-19 struggle

The government should scrap the triple lock on state pensions and instead increase it in line with the Consumer Price Index (CPI), according to the Association of Accounting Technicians (AAT).

The association’s recommendation was part of its response to the Treasury Select Committee’s inquiry into coronavirus and tax, which stated that the measure “would continue to provide annual increases that ensure older people are able to live with dignity and the respect they rightly deserve whilst simultaneously saving £6bn for British taxpayers by 2024-25”.

The triple lock on state pensions means that, each April, the benefit climbs by whichever is higher out of earnings growth, CPI inflation or 2.5 per cent.

The report continued: “According to the Office for Budget Responsibility (OBR), post-coronavirus earnings are predicted to grow by almost 20 per cent in 2021 following their collapse during the coronavirus crisis this year.

"No government will increase the state pension by 20 per cent no matter what manifesto commitments may have been made. So, there is an immediate urgency dictating change.

“This situation must be taken advantage of for the sake of the wider economy and in the interests of fairness to all taxpayers.”

Other pensions-related measures endorsed in the response included binning higher rates of pensions tax relief and introducing a single 20 per cent rate for everyone.

AAT said this would mean a reduction for higher earners, the same level of protection for basic rate payers and a £13bn annual dividend for the taxpayer.

The report also suggested that those receiving the state pension who were still in employment should no longer be exempt from paying national insurance contributions, commenting that there was “little justification for maintaining this”.

AAT said implementing this measure would raise more than £1.5bn each year.

The report also proposed that, as part of a slew of changes to inheritance tax, all pension funds left at death would be taxed at the flat rate of 20 per cent unless passing to a spouse.

The organisation said it had published the report due to the "unprecedented havoc" that the coronavirus had wrought on the British economy, noting that the OBR had suggested that a best case scenario is a £263.4bn cost to the British taxpayer and the worst case scenario is a £391.2bn debt.

The report stated: "This would have been a major challenge for any government even if the economy was in a healthy state prior to the pandemic. The reality is that the British economy was already heavily indebted and so the impact of coronavirus will be even more acutely felt.

"Indeed, the debt accumulated due to coronavirus has pushed national debt beyond 100 per cent of gross domestic product for the first time since 19613 and it now stands at more than £2trn for the first time in British history.

"Against this backdrop, the need for action is clear. Policymakers will likely favour higher taxes or lower spending or perhaps increased borrowing depending on their political ideology, but the harsh reality is that irrespective of political persuasion, a combination of the three is necessary to deal with the enormous scale of debt."

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