17th June 2013
Politicians just don’t seem able to not discuss the triple lock on the state pension or maybe it is journalists who can’t stop asking. This time, the FT interviews pension minister Steve Webb who says he cannot guarantee whether it will be in the next Lib Dem manifesto although he would like it to be.
The pink paper also talks to the Conservatives who say likewise. They can’t promise it will be in their manifesto either.
Nor has Labour made such a promise, though they have denied plans to unpick it due to their overall cap on welfare spending which will include pensions. Once again, it seems pensioners will be left watching politicians’ words carefully. If it goes in a manifesto, it becomes very difficult – though not impossible – to break that promise when in Government. The possibility of another coalition does change the calculations a little however.
The triple lock, as currently constituted, means that the state pension will rise at a reasonable rate – either by average wages, the consumer price index or 2.5 per cent whichever is the greater.
That may not sound like much, but it isn’t too bad a deal at all over time. Yet it isn’t set in legislative stone, even with the Pensions Bill being debated in Parliament today.
This following is from Tom McPhail, the pensions expert at Hargreaves Lansdown who crunched some of the numbers and gives some analysis in italics below.
The Pensions Bill provides for the state pension to be increased in line with earnings, not the triple lock. In fact the triple lock guarantee has no statutory underpin, it is based purely on the coalition agreement. It can be withdrawn at any time.
Ed Balls has spoken about pensioner benefits in recent weeks, he has expressed support for the triple lock, without nailing his colours firmly to the mast.
Without reform overall Exchequer spending on state pensions is due to rise as a proportion of GDP from 6.6% of GDP in 2016 to 8.5% by 2060. The single-tier reform reduces 2060 costs to around 8.1% of GDP.
The state spends £110 billion on pensioner benefits (including the state pension) while according to the DWP’s own impact assessment, the triple lock is set to cost the government an additional £45 billion over the next 15 years.
McPhail adds: “Politicians may end up playing chicken with each other over this issue; none of the parties will want to make unsustainable spending commitments but neither will they want to be the ones attracting the ire of pensioners for cutting their inflation proofing.”
Mindful Money thinks is definitely one to watch, especially if it is one of the issues that might just decide your vote. A reasonable flat rate pension, that increases reliably over the years, is a very handy underpinning to any investment and retirement strategy. But if you were basing your general election voting decision solely on this issue, it isn’t very easy to work out where to put your cross just yet.