The Government has largely tiptoed around the Work and Pensions Select Committee’s (WPSC) intergenerational fairness report by reiterating its commitment to the state pension triple lock until 2020 while failing to give any other indication on future policy direction.
In November, the WPSC proposed scrapping the state pension triple lock and replacing it with an earnings link after it concluded the economy had become “skewed in favour of baby-boomers and against millennials”.
In response, the Government has announced its approach to intergenerational fairness “is to ensure economic security for working people at every stage of their life, including retirement” and noted the value of the full basic state pension, as a proportion of average earnings, is at its highest level since the late 1980s.
It added: “The Government supports people seeking to return to work, which is the best way out of poverty, and provides individuals with the opportunity to save for a secure retirement.”
The Government also claimed the triple lock has been an “invaluable element” in helping pensioners who live in low-income households. It said the proportion of pensioners living in low income was now down to 14% from a peak of 40% in the 1980s.
It continued: “The latest data for the 2016 Autumn Statement shows that spending on pensioners as a percentage of GDP is falling: from 6.1% in 2010, it is forecast to fall to 5.6% in 2020.”
WPSC chair and MP Frank Field (pictured) said, however, that the Committee would continue to press for “cross-party consensus” on the replacement of the “unsustainable” triple lock after 2020.
He said: “The Government is right to say pensioner benefit spending has dipped slightly as a share of GDP, as accelerated increases in the state pension age have kicked in; but official projections show that, without reform, it will rise relentlessly from that point.
“The triple lock has been valuable but it is unsustainable. The Committee has recommended an alternative, which would maintain pensioners’ living standards and protect them from the effects of inflation.”
‘Days numbered’Aegon pensions director Steven Cameron has argued the triple lock’s days look “well and truly numbered” following the WPSC’s repeated calls to scrap the policy.
He said: “The Committee is right to point to the need for a consensus on a fair alternative that provides retirees with a sustainable level of state pension throughout their retirement but which doesn’t over burden working-age taxpayers, who ultimately foot the bill.
In Philip Hammond’s first (and last) Autumn Statement last November, the Chancellor pledged the triple lock – the mechanism by which the government increases the state pension each April by the higher of growth in average earnings, the Consumer Price Index or 2.5% – would remain in place at least until the next General Election, which is scheduled for 2020.
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