The Pensions and Lifetime Savings Association (PLSA) has joined the debate on the future of the triple lock – numbering the scrapping of the measure as the top pension priority for parties in the upcoming general election.
The trade body instead suggested the state pension should be pegged to earnings growth, “with a floor to protect against any periods of instability”.
Although the triple lock has been “valuable” in raising the relative income of pensioners, the PLSA continued, maintaining the policy would add around 1% of GDP to the cost of the state pension.
It called for “a simpler, fairer and more affordable uprating mechanism”, arguing that indexing in line with earnings would allow the state pension to maintain its current value of around 30% of average earnings.
The call to end the policy stemmed from concern about potential rises in the state pension age to 68 and more, which is something the PLSA wants to see avoided.
The trade body’s director of external affairs Graham Vidler (pictured) said: “It would be much fairer to set a specific target for the value of the state pension and the 30% of median earnings that it currently represents feels about right.”
Under the current system, the triple lock pegs annual rises in the state pension to the highest of inflation, average earnings growth, or 2.5%.
In the opening weeks of the 8 June general election campaign, Labour Party leader Jeremy Corbyn has already promised to maintain the triple lock, while Conservative Prime Minister Theresa May has declined to guarantee the policy will continue into the next Parliament.
In calling for an end to the policy, the PLSA has joined the likes of Work & Pensions Select Committee chairman Frank Field and former pensions minister Ros Altmann. Last year, Altmann described the triple lock as “unaffordable”, adding: “Such totemic symbols may be politically convenient but they are not a sound substitute for carefully considered policy reform.”
Vidler commented: “It is vital the next government strikes the right balance between state pension age and state pension rate.
“Replacing the triple lock with a simple earnings link will protect the value of future pensioners’ incomes while also reducing the need for further increases in the state pension age.”
Auto-enrolment increase
The PLSA has also called for auto-enrolment to reach 12% of salary by 2030, arguing steps should be taken now towards that goal.
The body further proposed the next government extend auto-enrolment to include 18 to 21 year-olds, self-employed people and those in multiple jobs paying low salaries totalling £10,000 or more.
Vidler said: “The next government needs to consolidate the growth of workplace pensions, increasing the reach of automatic enrolment and setting out a plan to raise contribution rates.”
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