6th January 2014
The Prime Minister David Cameron has promised to extend the ‘triple lock’ on the state pension for the life of a future Conservative government.
The triple lock is the mechanism by which the basic state pension increase in calculated each year. It rises by the lowest of three measures either the average rise in wages, consumer price inflation or 2.5%.
The news is being reported in some quarters as a rise in the pension though it is of course only an extension of the current means of calculating the annual upgrade.
The Prime Minister made the announcement on the BBC’s Andrew Marr show and it has been interpreted as a strong pitch for the grey vote in the next election. In response, the Labour business spokesman Chukka Ummuna said the party agreed with the triple lock in principle on Radio Four, though he said he couldn’t make any absolute spending pledges.
It has been pointed out previously by industry pension experts that all other things being equal, the triple lock means that the state pension will continue to rise significantly.
It also means that the pension will take an increasing share of public spending despite an announcement this week from the Chancellor George Osborne suggesting that another £25bn of cuts will be needed.
However moves to increase the retirement age should more than offset the potential call on public spending.
It has enlivened the debate about inter-generational fairness as continued cuts are promised and younger generations will, of course, have to work longer before they get access to the pension.
The move is likely to be welcomed by the retired and those close to retirement as it forms an important bedrock for pension planning.