We had thought the “triple-lock” on state pensions to be secure, well at least for the life of the current parliament (1). However a committee of MPs has now said the protection on state pensions should be scrapped calling it “unsustainable” and “unfair” on younger families (2).
The triple-lock guarantee has been safeguarding state pensions since 2010. It guarantees that pensions rise by the same as average earnings, the consumer price index, or 2.5%, whichever is the highest (1).
Historically, pensions were linked to inflation which had the effect of reduced pensioner incomes relative to working people. During the 6 years of the triple-lock policy, the state pension has risen by £1,100 including an increase of 2.9% in April this year (3).
MP’s siting on the Work and Pensions Committee recognised that the policy had benefited pensioners but highlighted the case of the Millennials. If you were born between 1981 and 2000 you face being the first generation in modern times to be financially worse off than their predecessors (4).
Describing the current “triple lock” the committee members were favouring a new link between the state pension and average earnings with an additional measure to protect pensioners during periods when earnings lag behind price inflation.
Even Iain Duncan Smith, the former Work and Pensions Secretary, who defended the introduction of the triple-lock in 2010 has also questioned the need for the lock (4). He said that this year the policy would cost £18bn more than was originally estimated and now needed to be re-examined.
Labour MP Frank Field, chairman of the committee, said that asking young people, who were not thriving, to support a group that has “fared relatively well in recent years” was no longer appropriate when pensioner poverty had been largely eliminated (4). Dot Gibson from the National Pensioners Convention argued that pensioners were “being blamed for the problems faced by today’s younger generations” (2).
“The housing crisis hasn’t been caused by pensioners but because in Britain we sold off council houses, we haven’t been building enough affordable homes, wages and employment are low and insecure and an economy built on house-price inflation simply cannot be sustained (4).
With the recommendations made and debate starting, it remains to be seen if the house will have the appetite to abandon a policy which has proved popular with an ever growing sector of society.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.