Is it time to scrap the state pension triple lock?

The triple lock guarantees that state pension payments go up by 2.5 per cent, the rate of inflation or average earnings, whichever is highest. But as the government scrambles to fill a multi-billion black hole in the public finances, has it become too expensive to sustain? We seek opposing views
Tom McPhail from The Lang Cat, a financial consultancy It is time to retire the triple lock which will put pensions up £460 in April. The original policy was introduced by the coalition government as a subtle way to raise the living standards of millions of low-income pensioners. In this it has been successful, but the policy itself is flawed and sits in a wider pension system that needs reform.
In the past few decades average pensioner incomes have risen, relative to working-age incomes, but this has not been true for the poorest pensioners. For these lower-income pensioners state pension increases have been offset by reductions in welfare payments, and they haven’t benefited from higher private pension and investment income as wealthier pensioners have.
The triple lock is hardwired to progressively increase the share of public spending devoted to all pensioners because it always increases by the most generous of inflation, earnings or 2.5 per cent; by definition, over time it will increase faster than anything that is linked to just one of those three measures. This contrasts with any other form of income, welfare payments or investment returns enjoyed by the rest of the population.
• State pension to rise by £460 next year
This is unsustainable in the long term; at some point, it has to change. If not, ultimately it would absorb the Department for Work and Pensions’ entire budget. The only question is when it changes, and what would replace it?
Targeted support, in the form of pension credit, is not working because many hundreds of thousands of eligible low-income pensioners aren’t receiving it, and because others who just miss out on eligibility are nevertheless struggling to live on their income. The Treasury has tried to cut back on the fringe universal benefits enjoyed by pensioners, starting with the TV licence and now the winter fuel allowance. Will the bus pass or free prescriptions be next?
The government has launched a review of pensions which primarily looks at private retirement pots. However, these private savings sit within a wider system of state benefits (including the state pension), housing and social care. The review should be broadened to encompass a wider discussion on how we provide for our retirements in the future. How we move on from the triple lock should be part of that review.
Joanna Elson, chief executive of the charity Independent AgeNow is not the right time to scrap the state pension triple lock. While it is not perfect, in the short term it does protect the income of people in later life who are struggling.
People in this group tell us they are watching every penny and can’t afford to lose any money because high costs are stretching their budgets to breaking point. Prices haven’t stabilised either, it was only last month that we found out that our energy bills will be rising again this autumn.
Those that argue against the triple lock sometimes assume that older people are financially secure, living in mortgage-free homes with large savings pots. While this is true for some, it doesn’t reflect the situation for the almost two million older people who are living in poverty. In fact, one in eight pensioners rely solely on the state pension and other entitlements for their income.
Living in poverty can be miserable and isolating at any age. Some of the older people we speak to at Independent Age share with us the reality of going to bed in hats and coats, having just one meal a day and cutting back on washing themselves to avoid using water.
• How much state pension will I get?
Abolishing the triple lock right now would also risk plunging more older people into financial hardship at a time when millions in later life are about to lose their winter fuel payment. Government figures suggest that some 1.2 million eligible older people don’t get the pension credit they are entitled to and will now face losing this one-off payment — vital money that would have helped them this winter.
For these reasons, the triple lock must remain for now, not just to protect older people in the short term, but also to ensure that future generations will have access to a minimum income that has at least grown in line with inflation.
Before considering any change to the triple lock we are urging the new government to determine what an adequate income in older age is, then ensure everyone in later life achieves this. This is the best way to remove the constant worry and uncertainty over the future of triple lock and ensure financial security for all of us as we age.