The triple lock should be scrapped as part of “intergenerational reciprocation” for the costs of battling the coronavirus, think tank The Social Market Foundation (SMF) has said.
On Tuesday morning the SMF published a briefing paper that proposed the triple lock be scraped so the economic burden of the pandemic could be shared fairly between the old and the young.
The triple lock guarantees the basic state pension will rise in line with the lowest of earnings, inflation or 2.5%.
The SMF estimated replacing the triple lock with a ‘double lock’ by removing the 2.5% promise would save £20bn over five years, which could be used to help meet the costs arising from lockdown.
The paper argued the economic impact of lockdown was falling most heavily on those of working-age, many of whom could face redundancy. At the same time, the policies have been deployed to protect the lives and wellbeing of the most vulnerable to the virus – a group that includes the elderly.
According to SMF research director Scott Corfe, who also authored the paper, maintaining the triple lock during the economic recovery would put additional financial burden on younger workers and strain the social contract between the generations.
He said: “Quite rightly, society is making sacrifices to protect its elderly right now. There is a clear case for intergenerational reciprocation when it comes to meeting the fiscal costs of the crisis in the years ahead.
“The crisis has emphasised our obligations to other generations, even in the face of personal sacrifice. This spirit must be maintained when the dust settles – with the economic costs of responding to the crisis shared fairly across the generations.”
Now: Pensions director of policy Adrian Boulding said in the event the triple lock was scrapped, other measures must be put in place so the UK did not fall “even further” behind the European average for total pension provision.
He explained: “The UK state pension is much lower than the European average, with OECD analysis showing our state pension provides a replacement of 30% of pre-retirement earnings compared to an EU average of 70%.
“This has traditionally been supplemented by generous defined benefit occupational pension schemes, but the transition to low statutory minimum auto-enrolment (AE) contributions means that AE will deliver only around a 15% replacement, bringing the total to 45%.”
The director continued: “The triple lock is a device that is quite deliberately lifting the UK state pension to a higher replacement level. If government chooses to withdraw the triple lock from the state pension, then they should look to a compensatory increase in the statutory minimum AE contributions to prevent the UK falling even further behind the European average for total pension provision.”