The Pensions Bill provides for the state pension to be increased in line with earnings, not the triple lock. In fact the triple lock guarantee has no statutory underpin, it is based purely on the coalition agreement. It can be withdrawn at any time.
Ed Balls has spoken about pensioner benefits in recent weeks, he has expressed support for the triple lock, without nailing his colours firmly to the mast. Without reform overall Exchequer spending on state pensions is due to rise as a proportion of GDP from 6.6 percent of GDP in 2016 to 8.5 percent by 2060. Single-tier reform reduces 2060 costs to around 8.1 percent of GDP. According to the IFS relative pensioner poverty is falling rapidly. The state spends £110 billion on pensioner benefits (including the state pension). According to the DWP’s own impact assessment, the triple lock is set to cost the government an additional £45 billion over the next 15 years.
As we all know, pensioners are a powerful electoral grouping. Will any party have the political desperation to formally announce that it will maintain the Triple Lock into the next parliament? We doubt it. For reference, the Triple Lock provides for the state pension to increase in line with the higher of earnings, inflation or 2.5 percent. Tom McPhail, Head of Pensions Research ‘Politicians may end up playing chicken with each other over this issue; none of the parties will want to make unsustainable spending commitments but neither will they want to be the ones attracting the ire of pensioners for cutting their inflation proofing.’
Pot Follows Member (PFM)
PFM is the government’s solution to problem of bringing millions of new savers into pensions, it is a way of ensuring that as we change jobs through our working lives, we don’t end up with a multitude of different pension accounts. Steve Webb has spoken in recent days of his frustration at the industry’s failure to help implement PFM. The reason PFM isn’t working is that it is fundamentally flawed. Better alternatives do exist, such as a clearing house for pension contributions. We anticipate that unless the government changes direction on PFM, it may end up getting thrown out of the Bill altogether.
