Scrapping triple lock could wipe 5% from low-earning millennials' pensions

Removing the triple lock on state pensions could reduce the retirement income of a low-earning millennial by 5 per cent, according to research from the Pensions Policy Institute (PPI).

The PPI’s research, The impact of the introduction of automatic enrolment on future generations, said that a low earner’s pension income, somebody earning £19,000 at the age of 40, would be 2 per cent lower by moving to a double lock and 5 per cent lower under an earnings linked state pension.

The triple lock is expected to last until 2020 and Standard Life head of pensions strategy Jamie Jenkins believes it is inevitable that the triple lock will be replaced, as keeping it would be an “unrealistic benchmark against the way the economy works”.

Jenkins said: “The triple lock is a form of bringing the state pension up to a certain level, and accelerating that change having lost pace previously with earnings and inflation, the triple lock accelerates and brings it back to what we believe as a nation is a more respectable retirement from the state.

“The 2.5 per cent for example has no reference point to anything in particular, and if you had a period of ten years where everything else was zero and we were still increasing state pension by 2.5 per cent it would end up being more than the average wage. So the notion that you would keep the state pension triple locked forever is unrealistic.”

Under the current system, the triple lock increases the state pension by whichever is greater out of the annual growth in earnings, consumer price inflation or by 2 .5 per cent.

“So the question is how long do you keep it and what level do you decide to move it to a single or a double lock which is more realistic”, Jenkins added.

The research, sponsored by Standard Life, was in part a reaction to the government’s Automatic Enrolment Review, published in December 2017.

Furthermore, the report found that a median earning 22-year old in 2017 could achieve a pension fund of £108,000 through minimum payments, and if auto enrolled at 18, the AE Review recommended age, the pot could reach £146,200 at state pension age.

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