Industry experts call for 'comprehensive' triple lock review

Industry experts have warned that dropping the triple lock earnings limit link could set a “dangerous precedent” that pensioners are a target for cost savings, stating that a comprehensive review of pensioner support is needed, rather than a "knee-jerk reaction”.

The comments were made following reports in The Telegraph that the government is planning to temporarily water down the triple lock, potentially by removing the earnings limit link or by adopting a two-year average for earnings rises.

This comes amid growing pressure for the government to take action on the triple lock, with recent earnings growth figures from the Office for National Statistics (ONS) raising further questions over its affordability.

However, former pensions minister, Baroness Ros Altmann, highlighted the plan to potentially remove the promised protection in relation to average earnings as “disappointing”, urging the Chancellor to "think again".

Altmann warned that it is important that the country does not keep using pensions as a “political target to raid”, stressing that stability and protection are “so important for our older generations”.

She stated: “The triple lock had already outlived its usefulness by 2016 as it was applied to the full new state pension while only the old basic state pension was triple-locked, with the other elements tied to prices.

“So it did need to be reconsidered, but that should take place with careful consideration and perhaps reverting to a double lock, but the 2.5 per cent is an arbitrary figure which is difficult to justify on economic or social grounds. “

Indeed, Altmann warned that abandoning the earnings link could set a “dangerous precedent” as the UK has a “hugely divided pensioner population” and "the lowest state pension in the developed world", meaning that pensioners need proper protection.

“There is a need for a comprehensive review of all aspects of state support for pensioners, but this should be done in a thoughtful and considered manner, rather than as a knee-jerk reaction to one year’s numbers,” she stated.

This was echoed by Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, who agreed that whether the government decides to break its manifesto pledge to maintain the lock, “it is clear there needs to be a review of the state pension and the triple lock’s role within it”.

“As the UK economy recovers from the pandemic the last thing the government needs is an inflation busting 8 per cent rise in state pension next year courtesy of the triple lock,” she stated.

“The triple lock has done much to improve the income of pensioners with the independent Cridland review noting it had repaired much of the erosion in the value of state pensions and that if left as it is it could be open to allegations of intergenerational unfairness in the future.

“It is time to look at the state pension and ask whether the triple lock is the best way to maintain its value long-term while striking a balance between taxpayers and pensioners.”

Quilter head of retirement policy, Jon Greer, however, said that whilst positing such a temporary change could be a “political minefield, it is right to correct the earnings growth anomaly”.

He continued: “The Prime Minister looks set to diffuse the ticking time bomb that is the triple lock by moving either to a two-year average for earnings growth or removing the earnings link entirely.

“Wages are not on the rise now because the economy is booming. They are in fact increasing rapidly purely due to technical factors, including the fact that the furlough scheme artificially supressed wages last year.

“To give pensioners an almost double-digit boost to their incomes, purely as a result of a technicality which stemmed from millions of people in the UK reducing their hours or stopping work altogether would seem obtuse from an intergenerational fairness perspective.

“Using a two-year average figure will save the government £4.1bn compared with if they continued with an 8 per cent increase. Using a 2.5 per cent figure would save £5bn compared to the 8 per cent increase. The extra £0.9bn saving may well appeal to Sunak.”

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