Think-tank urges scrapping of triple lock to spread Covid-19 cost burden

The Social Market Foundation (SMF) has urged the government to scrap the state pension triple lock to help spread the cost of Covid-19 between generations.

The think-tank argued that it should be abandoned to ensure that the economic recovery from lockdown is fair to working-age households.

It recommended replacing the current system with a ‘double lock’, which would see the guarantee that the basic state pension rises by at least 2.5 per cent being scrapped.

The measures of guaranteeing an increase by either the lowest of earnings or inflation would remain in SMF’s ‘double lock’ system.

SMF said that this would help meet the “huge costs” arising from the crisis and spread the cost between young and old.

Its report stated: “In the post-crisis world of slow, painful recovery, a triple lock ensuring a 2.5 per cent minimum rise in pensions would constitute enormous generosity to pensioners, at a time when working-age adults face low or no wage growth and significant unemployment.

“In the context of an annual deficit that could reach £200bn as we emerge from the crisis, shaving £4bn a year from the growth of the £100 pension bill is not too much to ask. It would also demonstrate reciprocity from a group whose wellbeing was, rightly, prioritised during the lockdown phase of the crisis.”

The think-tank warned that the economic impact of lockdown was falling heavily on working-age Brits and said that any future austerity programme should not favour pension spending over working-age welfare.

SMF research director, Scott Corfe, added: “Quite rightly, society is making sacrifices to protect its elderly right now. There is a clear case for intergenerational reciprocation when it comes to meeting the fiscal costs of the crisis in the years ahead.

“The crisis has emphasised our obligations to other generations, even in the face of personal sacrifice. This spirit must be maintained when the dust settles – with the economic costs of responding to the crisis shared fairly across the generations.”

Now Pensions director of policy, Adrian Boulding, warned that if the triple lock was abandoned, the loss in state pension income would need to be recovered by an alternative measure.

He commented: “The UK state pension is much lower than the European average, with OECD analysis showing our state pension provides a replacement of 30 per cent of pre-retirement earnings, compared to an EU average of 70 per cent.

“This has traditionally been supplemented by generous DB occupational pension schemes, but the transition to low statutory minimum auto-enrolment (AE) contributions means that AE will deliver only around a 15 per cent replacement, bringing the total to 45 per cent.

“The triple lock is a device that is quite deliberately lifting the UK state pension to a higher replacement level. If the government chooses to withdraw the triple lock from the state pension, then they should look to a compensatory increase in the statutory minimum AE contributions to prevent the UK falling even further behind the European average for total pension provision.”

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