Scrapping the triple lock this year would be a mistake – we need a long-term review of pension support
4 min read
The complexity of pensioner support has hidden the shortcomings of the triple lock being an imperfect policy.
The state pension triple lock is a political construct that has acquired totemic significance – and is not a sensible long-term policy. Nevertheless, I would strongly caution against abandoning it just because of one year’s figures.
Instead, we need a comprehensive review of all aspects of pensioner support, which could reduce the mind-boggling array of different parts. Ideally it would be helpful to remove political meddling and devise a sensible basic retirement income system for all.
The state pension triple lock is an inefficient policy tool for managing pensions but has proved a really potent political one. It has become a short-hand symbol of government support for pensioners, even though it actually offers least protection to the oldest and poorest pensioners – hardly the aims one would recommend.
In fact, the UK state pension itself is the lowest in the developed world. Yes, there are some very well-off pensioners, but millions of older citizens – especially women – rely solely on state support, having had little opportunity to build up private pensions when younger.
Because pensioners are a significant political bloc, politicians have added various parts to the original system over the years, to garner votes. They then became a fixture which politicians dared not remove. These include tax- free winter fuel payments, free travel, free prescriptions plus Christmas bonuses, age additions and so on, which add to taxpayer costs of pensioner support. There are also different earnings-related parts of the state pension itself, which have been changed over the years. This complex patchwork of pensioner support needs an overhaul.
The triple lock itself is a political construct, rather than being a sensible long-term policy
Indeed, the complexity has hidden the shortcomings of the triple lock being an imperfect pensioner support policy. It only protects two parts of the multi-part state pension - the old basic state pension (paid to those over age 70 and currently £137.60 a week), and the full new state pension (£179.60 a week) for those who reached state pension age since 2016. In addition to younger pensioners an extra £40 of triple-lock protection, it does not cover the poorest, who rely on pension credit. This only needs to rise in line with average earnings and all the other elements of the national insurance state pension (such as SERPS, state second pension, deferred pension, additional pensions) rise in line with cpi price inflation.
The earnings increase in the three months to July is the normal base used to determine the earnings figure for state pensions next year. This could be as high as 8 per cent, causing many calls for the triple lock Manifesto pledge to be scrapped to save public money. This would have significant electoral risks, especially with such a low state pension in the first place. Just scrapping it because one year seems out of line with expectations would be yet another short-term politically-inspired reform to a policy that needs long-term and holistic reconsideration.
The triple lock itself is a political construct, rather than being a sensible long-term policy. The coalition government introduced it in 2010 to show support for pensioners while other benefits were cut. But it is the 2.5 per cent part that seems anomalous and moving to a double lock would help ensure pensioners keep up with earnings or price rises across society.
So, I would caution against removing the state pension earnings link this year. However, a thorough official review of the whole structure of state pension support for the long-term future is vital, considering rolling all the tax-free add-ons into a better state pension, so they become taxable. It must also consider the state pension age rises, which have not taken account of wide differentials in healthy life expectancy and private pension coverage, as well as length of national insurance contributions across society.
A fairer system would enable greater flexibility to reflect the wide range of individual circumstances, rather than just catering to an average. Taking the politics out of pensions would be a great achievement.
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