Millions more people of working age could be expected to face a disappointing retirement if changes are made to the state pension triple lock, according to previously unpublished data from the Department for Work and Pensions (DWP).

Previous data from the DWP suggested that around 14.6 million people are under-saving for retirement and could face a sharp drop in their standard of living when they stop work. 

However, a freedom of information (FOI) request from LCP has suggested that the picture could be much worse, with unpublished DWP figures revealing the "shocking" state of under-saving for retirement in the UK.

LCP noted that the DWP's initial figures assumed that the state pension ‘triple lock’ remains in place for the next fifty years.

But its FOI revealed that the DWP had also run similar projections on the basis that the state pension was either linked in future to the growth in average earnings or linked simply to inflation, as was the policy prior to the introduction of the triple lock.

Under both of these alternative assumptions, millions more people of working age can be expected to face a disappointing retirement.

In particular, the DWP's estimates showed that dropping the triple lock and linking increases to earnings would lead to 19 million (56 per cent) facing a sharp drop in their standard of living on retirement, while 26.1 million (77 per cent) would see such a drop if it was linked to inflation.

According to the analysis, the number of Brits failing to meet even the Pensions UK minimum threshold would also rise sharply if the triple lock were scrapped, while an earnings link in future would see an extra 1.4 million failing to reach this minimum threshold, and a price link would see more than 7 million extra pensioners likely to retire below this basic standard.
 
And although the number set to miss out on a ‘moderate’ standard of living is already "very high", with 25.4 million or 73 per cent set to fall short, the DWP's analysis showed that weakening the uprating of the state pension would add up to 3.4 million more to this number.

Given this, LCP suggested that these numbers should be used to help inform not only the debate about the future of the triple lock but also the forthcoming Budget, where it is widely rumoured that the Chancellor will raise up to £2bn by cutting back on workplace salary sacrifice schemes.  

This, LCP argued, would further undermine pension saving, despite these figures showing that the true state of under-saving is already far greater than previously revealed.

Commenting, LCP partner, Steve Webb, said: “These shocking figures reveal that the true state of under-saving for retirement in Britain is far greater than has previously been admitted.  

"Very few people expect the triple lock to continue for another fifty years, yet this is the basis on which the government has so far published estimates.  If the triple lock were to be replaced by an earnings link, millions more people would face a sharp drop in their standard of living when they retire.  

"And a prices link, as was the policy until 2010, would see around 1 in 3 of today’s workers set to retire short of even a bare ‘minimum’ standard of living.  Against this backdrop, the Chancellor should be taking measures in the Budget to boost pension saving, not undermine it."

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