There is much heat in the papers over the news that Rishi Sunak is likely to break the supposed pension triple lock that has guaranteed pensioners wage or inflation matching increases in their incomes over the last decade.
The ‘triple lock' guarantees that pensions will increase by either 2.5%, the rate of inflation, or the level of earnings recorded in the July employment figures for the previous year. It's been a Tory promise for about a decade. The result has been that the real rate of pensions has increased. But let's not celebrate: the real rate of UK state pensions is still way below the European average and guarantees that many pensioners live in poverty.
So what's the issue? It is simply that because of the pandemic apparent pay rises in the last year look to be about 8%. That's because, firstly, there were a lot of people who lost their jobs when the pandemic hit. They tended to be the young and those on low pay. Employment for them has not recovered. So those now in work tend to be on higher wages. They're not earning more. In fact they may be no better off. But because the low paid have fallen in larger proportion out of the workforce average pay appears to have risen when no one is much better off. So, there's a statistical freak happening.
Secondly, furlough suppressed the wages of millions a year ago, and now it is not to the same degree: people only got 80% of their wages under furlough.
Put those facts together and the result is a statistic now that might give pensioners an 8% pay rise, which the government does not want.
What are the lessons? There are several. First, don't use statistics as a substitute for policy. Claiming that the triple lock was a good deal is now shown to only be true when it is a deal in the government's favour. That's not a policy. That's an excuse for a policy.
Second, get the statistics right. Like so many of our national statistics, it turns out this data is not robust. It's time to be honest about that fact.
Third, tackle the problem with youth unemployment, and their low pay. The triple lock was always going to create inter-generational injustice, and this issue just proves it.
Fourth, rethink pensions. The triple lock has done nothing to tackle pensioner poverty in the UK, which is a national disgrace and which is not corrected by benefits that have to be claimed, which millions do not do, whether because of pride, lack of knowledge of entitlement or inability to handle the process. It's time we got pensions right, and this latest issue is a clear sign that we have not.
So, should the pension triple lock be honoured? The answer is yes, if it's still thought that using data to determine pay increases for pensioners is the right way to go. And it's no if the decision now is to use a better basis for informing pension decision making that guarantees that the elderly in this country do not need to live in fear of winter and the cold that it brings because they simply do not have enough money to stay warm and eat at the same time.
What do I favour? A proper review of pension policy, of course. But since an 8% increase would be insufficient as an answer to any such review I think the pension lock should be honoured as a step in the right direction.
Will either of those things happen? Of course not. Why? Because this government does not care. Pensioners should really remember that next time they come to vote.
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Lot’s of good points in this post that ring true from one who works and has had his own pension messed about with.
I note too that fear mongering on interest rate rises is back again. Great! When will they just shut up? Not I fear until ‘they’ get what they want.
When it comes to looking at low pay and the state pension the use of ‘percentages’ is very misleading. 8 % of what? I was fortunate to work some 49 years paying full N I and tax (up to 33% at times) so earned the maximum State Pension. £669 every 4 weeks, an increase of 8% would give me an additional £53.52 or £13.38 per week. A substantial amount in SP terms and a very welcome increase for many pensioners who do not benefit from a company pension and home ownership like myself. I would add that I have a modest company pension of £529 per month. I am also taxed on this substantial amount!
Our State Pension is a disgrace and I dread to think of the future for workers today because for the overwhelming majority any company pension will be very modest indeed, with the old final salary pension having all but disappeared.
Pensioners are a tough nut to crack in relation to politics. In the 80’s I couldn’t believe that my mates mom was going to vote Conservative when it was obvious even to me that the govt was cutting her income. Although Brexit has shown that they have some buttons that can be pressed as some did switch from Labour to vote Conservative this past GE.
The triple lock is a useful reminder that pegging policy to a particular set of data is foolish.
Leaving aside the broader issue of pension levels, no fair minded person would object to the Chancellor saying “exceptional circumstances demand a change in policy. Raising pensions by 8% (on a statistical quirk) at a time when most people are seeing cuts in living standards would be wrong. So, pensions this year will rise in line with inflation. We retain our long term commitment to raise pensions in line with earnings.” Simple and most people would understand and accept. Why the drama?
On the bigger issue of pension policy…….
Raise state pensions to a level where means tested top-ups are not needed, abolish tax incentives to save for a pension above a certain (modest) amount, eliminate National Insurance by rolling it into income tax.
All quite simple and within the existing machinery of the state.
Because nothing this government says about the well being of citizens, however young or old they may be, can be believed. The government will ensure pensioners don’t get a decent state pension this year, next year, forever. There will always be a reason not to, usually a recycling of the current one: if young people are badly off, old people should be badly off too. And look at the benefit: mutual dislike between the two groups. Divide and conquer.
If the triple lock is broken, any future percentage rise (using the lock or not) will be on the reduced sum. Whether the lock is a good idea or a bad idea, building a perpetuating decrease into the current method yet again drives greater inequality.
I expect no less from the current government, I suppose. If the aged Tory and the new Tory voter can’t work towards healing the planet for their children, they aren’t going to bother about the Pension of the poorest, are they?
It is the political dimension that matters. It is the grey vote that keeps the Tories in power. Will breaking a manifesto pledge to down well in Orpington, or more important Hartlepool? Fascinating to watch.
Sorry o/t re Twitter
Has anyone else experienced Twitter not allowing access via browser anymore? It seems to insist signing up or logging in or downloading on App?
I can’t peruse comments on your or any other Twitter feed since the weekend.
Sorry…no idea why
DG – I can access original posts by browser on my PC, but following threads is now impossible. On my tablet all seems as before. No sure why, maybe something to do with which browser you use?
@ DunGroanin
Yes, similar problem re: Twitter
Solved for me on Firefox by opening a ‘New Private Window’ under ‘File’ options.
It would appear to be a ‘remembering history’ issue.
Hope this helps.
As you point out, abandoning the state pension triple lock will erode the Tory voter base if voters remember this at the next general election. However, the 2 million or so pensioners who are in dire poverty probably don’t vote or don’t vote Tory. As PSR points out occupational pensions are also being abandoned or eroded and use the state rates as a guide. Intergenerational tension will continue whatever the government does or doesn’t do. Unless the minimum wage is increased substantially or the Universal Credit rate increased substantially and the £20 per week cuts are abandoned, the Tories are in trouble if they want the present “younger” generation to continue to vote for them with present policies (or lack of).
Well put Richard. There is too much generalising, implying that somehow UK pensioners are all fat cats, yet another aspect of the divisiveness that we are plagued with. The reality is as you say that we have extraordinarily low pensions by the standards of most developed countries. The triple lock is not the best way to tackle the problem but it is all that we have until our pensions system is properly reviewed. The bloated pension funds and tax breaks of the very rich are a different matter.
Im fortunate enough to have enough with a mess of state, private and the remnants of final salary, perhaps a bit like PSR. My parents and in-laws generations did have final salary schemes but very few of my contemporaries have them, apart from those who spent a career in major companies or civil service. They are now very much in the minority, contrary to what much publicity would have us believe.
The DWP appear intent on making life unpleasant for pensioners now as they demand information with their usual clodhopping insensitivity https://davidhencke.com/2021/08/12/exclusive-frightening-dwp-letter-to-pensioners-report-for-telephone-interview-or-we-can-stop-your-pension/ These constant attacks on social security should be seen for what they are, an attack on society itself as it’s social security which underpins the economy in which we all swim.
Absolutely not. Current basic pensionnis £137.60 per week. An increase of 8% equates to £11 per week. If we as a country can’t afford this increase for the most vulnerable then there is a serious problem. It’s strange how people on a 6 figure salary think breaking the tripple lock is a good idea.
Most used saying in Scotland ” Never trust a Tory “
Cant believe I have waited six extra years to get my pension due originally in 2016
now April 2022 and now they take away the triple lock which would have been a little bonus to make up the six lost years. Once again us WASPIES are being penalised
Do you mean that you had to wait the same amount of time as your male colleague would?
Was the triple lock a ‘promise’ when you started work? Of course not, it was a bonus that the Tories introduced which provided a benefit increase. You are not being penalised.
If you do not know the issue do not comment
The triple lock is not being referred to
What is being referred to is the alignment in retirement ages
The full New State Pension is currently £179.60 pw although current DWP figures give an average payment for all pensioners of £157.74pw
We are in effect ‘locking in’ this increase into the full NSP figure, ie £14.36pw, HOWEVER given that inflation is forecast to be 4% only half this – £7.18 is a ‘real terms’ increase.
Firstly given that the UK spends significantly less that most European Nations on its state pension I suggest that it is affordable, secondly given that those on lower incomes (Pensioners) experience a higher rate of inflation than those on high incomes because they spend a higher percentage of their incomes on essentials especially fuel for many the ‘real’ value of the increase will be less.
Then there is the question of how much of this increase will come back to The Government as mentioned in an earlier post, for lower income Pensioners on Housing Benefit 65% will disappear immediately while for many 20% will go in Income Tax. Then of course much of it will be spent in the real economy, not only boosting that but I suggest that if it is spent on heating, better food, or self care possibly reducing the NHS bill?
I full understand the issue – Women are being asked to work to the same age as men. It’s equality, something that is normally seen as good and fair (when it suits women).
And Ms Sally Newland did explicitly reference the Triple lock – “and now they take away the triple lock which would have been a little bonus “.
So perhaps you should read what is actually written before jumping in to criticise?
I did
You missed the point at every level
You’re also trolling
And that leads to an automatic ban, which you have just got