The biggest question in Britain’s state pension revamp is the future of the triple lock – should it stay or should it go?
A recent report by former CBI director John Cridland has suggested it be scrapped because it is too expensive to maintain and, speaking at Prime Minister’s Questions, Theresa May refused to say whether the Conservatives will keep current protection in place if they win the General Election next month.
However, Labour have pledged they will keep the triple lock throughout the next Parliament if they win.
The triple lock ensures the state pension rises in line with wages, inflation or 2.5% a year – whichever is the highest.
Now a former pensions minister Steve Webb has suggested a third course of action by proposing the triple lock should only apply to anyone retiring before April 6th 2016. He proposes that the pension for anyone retiring after that date should rise in line with earnings only.
Mr Webb – now a director of insurance company Royal London – claims the move will save £3 billion a year by 2028. He further claims that as newly retired pensioners are an average of £100 a month better off than those aged 75, the policy would increasingly target money for the older, poorer group.
20 years ago
He said: “There’s a big difference between pensioners who retired 20 years ago… for whom the state pension really matters, and someone who just retired. The proposals would control costs and give pension increases to those most in need.
“This is the first time that someone has said anything other than scrap it or keep it,” he added.
Continue to rise
In her Commons statement Mrs May pledged that pension incomes would continue to rise, but would not be drawn about how much.
Her government is currently omitted to keep the triple lock until 2020, but the Works and Pensions department said recently it should be scrapped on the grounds that it is ‘unsustainable’ and ‘unfair’ on younger families.
Their proposal was to continue protecting the pension’s value in line with wages or inflation, but to remove the minimum annual increase.
Labour’s shadow Treasury minister, Rebecca Long-Bailey, said the Tory plan caused ‘uncertainty and worry’, proposing the triple lock should stay until the end of the next Parliament in 2025.
Shadow Chancellor, John McDonnell, accused the government of ‘abandoning older people’ by not continuing the triple lock guarantee.
He said: “Labour will support the pensions triple lock and instead of cutting taxes for the super-rich and giant corporations will make sure our NHS and social care is properly funded.”
A more radical pension cost cutting measure has just been proposed by Europe’s Organisation for Economic Co-operation and Development (OECD).
They suggest scrapping the state pension altogether for the wealthiest 5-10% of British retirees to ‘free up resources’ and enable pensions for the rest of us to continue to be increased.
Commenting on the pressure the UK is under from an ageing society and shrinking number of workers, spokesman Mark Pearson said: “Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?
“Or another way to ensure an adequate pension is to think about whether the pension should only be paid to those who really need it, to ease the tyranny of the maths. Giving less pension to the people at the top would free up resources to increase general benefits.”