‘Middle way’ to protect our poorest pensioners
A“MIDDLE way” could be found to keep the state pension triple lock, a former pensions minister has suggested.
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, argued there could be a compromise whereby costs are controlled and more generous annual increases are focused on pensioners who need it most.
The triple lock ensures the state pension increases in line with wages, inflation or by 2.5 per cent – whichever is highest. But there have been mounting calls to scrap it, amid concerns over cost pressures.
A recent review by former CBI director-general John Cridland, who was appointed as the Government’s independent reviewer of state pension age last year, recommended that the triple lock was withdrawn in the next Parliament.
Labour has committed to keeping the triple lock up until 2025. Theresa May has refused to guarantee the triple lock on pensions will continue, but the Prime Minister has said that pensioner incomes would continue to rise under a Conservative government.
Royal London is proposing that a middle ground could be found whereby the triple lock is focused more towards older, poorer pension- ers. It said the triple lock should be retained for all pensioners on the old basic state pension, before the new state pension was introduced in April 2016.
For those retiring after this time, their state pension should be linked to increases in earnings, it suggested. It calculates the change would save around £500 million per year by 2021/22, rising to nearly £3 billion per year by 2027/28, ensuring longterm sustainability.
Former Liberal Democrat MP Sir Steve was pensions minister in the coalition government between 2010 and 2015. He said: “The triple lock has delivered big improvements to pensioner incomes since 2010 but political parties will be concerned about the long-term cost implications of this policy on top of increased spending on health and social care associated with an ageing population.
“On the other hand, abolishing the triple lock outright would leave many existing pensioners on relatively modest incomes, with older pensioners facing much lower living standards than the newly retired. A middle way approach would preserve the tri- ple lock for those who reached pension age under the old state pension system, whilst reverting to an earnings link for the newly retired.
“This would cap the cost of the triple lock whilst focusing spending increasingly on the older and poorer section of the pensioner population.”
Royal London is also calling for increases in workers’ contributions into workplace pensions to be linked with pay rises, to encourage people to save more. An annual step up in pension contributions could be applied automatically unless workers opt out.