Pensions triple lock under governmental review
The pensions triple-lock scheme which guarantees a minimum increase in state pension per year could be ditched in favour of a cheaper so-called ‘double lock’ option.
According to The Guardian, Prime Minister Theresa May is “considering” the double-lock option to release money for social care.
Under the current system which was introduced by the coalition government in 2010, the triple lock scheme guarantees that the basic state pension will increase each year based on which is the highest: inflation or average earnings or by a minimum of 2.5%. It is now being viewed as unsustainable due to stagnating pay and an increase in the price of living.
The double-lock system, which is being considered by the government as a cheaper alternative, would remove the 2.5% annual increase, an idea that the Guardian reports as being “politically sellable”.
Jason Cannon, corporate pensions consultant at Aon Employee Benefits, described the 2.5% increase as a “political promise” - one which is now “reducing and restricting” the capacity for public spending in other areas of social care.
“It is a much more generous policy than we are seeing for working-age benefits, child benefit and tax credits, for example,” he said.
During Prime Minister’s Questions at the end of April, the Prime Minister hinted that the policy was under review.
The triple lock system has protected pensioners in recent years, especially during times of high inflation and slow earnings growth. In February, a report by the Resolution Foundation revealed that new retirees with occupational pensions were £20 a week better off than those who work. The report revealed a reversal in fortunes in comparison to 2001 where pensioners were £70 a week worse off than those in work.
But Downing Street have since back-tracked on the issue amid voter backlash and new financial projections which indicate that savings accrued from the double-lock would not be worth the risk, the Daily Mail reports.
Cannon added: “Pension policy should always have a long-term vision, but it is often the case that key policy decisions are impacted by shorter term political considerations. Whilst we balance the debate as to whether the triple lock is unsustainable given other key demands on the public purse, one could also argue that this promise was only put in place not long after the state pension was at its lowest level, relative to average full time earnings and as such, whilst the policy has led to improvement, there is still a long way to go.”
This article was provided by Aon Employee Benefits.
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