It’s currently linked to the higher of increase in the average wage, the rate of inflation or 2.5%.
At the moment, the proposal seems to be doing the first one.
The is a laudable aim, if somewhat ill-defined.
This is a terrible way to do it, noting the ill-defined point.
Indeed so. However, I still think that linking to the actual inflation rate is the way to go so that pensioners neither fall behind, nor advance ahead of other people. Consider the scenario where wages stagnate, and the BofE manages to reduce inflation to the 2% target, in which case why should pensioners receive a rise of 2.5%. On the other hand, if wages increase by say 4%, then why should pensioners receive an equal raise when they have not contributed any efforts to achieve it.
All in all, I think linking to the inflation rate is best.
No argument here
Because pensioners contributed both national insurance and taxes over the many years they were working.
As Lord @Porridge mentioned, the Triple Lock was intended to correct a shortfall that had arisen when the State Pension was linked to wages growth not inflation - an era of high inflation and low wage growth eroded pensioners’ standard of living.
Linking to inflation would be fairer IMHO - it was linking to wages that caused the problem in the first place. And pensioners (especially older or disabled ones) generally find it difficult to increase their incomes by other means, while wage earners potentially can.
That’s a very narrow view of what making a contribution is. I want the whole of society to benefit from increased prosperity.
The logic of linking pension increase to wages is that National Insurance contributions - both parts - are a percentage of income, so a rise in earnings puts more money into the system.
But I’m open to persuasion.
Indeed so. However, Pensioners are in the main non-working retired people who do not pay NI contributions. Therefore giving Pensioners a rise linked to wage growth will not actually put any extra money into the tax coffers.
Linking to inflation ensures that Pensioners buying power does not fall by the wayside.
If only the stated inflation figure aligned with the real costs of living increases. Every week the shopping basket costs more and is easily out pacing the stated inflation figure
3 Likes
Yes, I agree. The Bakery next door to us has just increased the price of Croissants by 8.3% for example.
The trouble with the inflation statistics is that Gov’t has an incentive to massage the figure to be as low as possible.
I believe that it was Churchill who said that there are lies, damned lies, and statistics !
2 Likes
Baroness Ros Altmann, a voice of good sense on pensions that often debunks whatever line the politicians of either main party are trying to push on pensions, has been reported in the professional financial press (the FT) as saying
“The numbers “just do not stack up” on funding free social care from the proposed triple lock reform”
And I think that’s obvious. It will have to come from taxation, which isn’t a bad thing.
Let’s hope that Burnham is more honest about that sort of thing than his predecessors were.
That’s not really surprising since Burnham specifically said that.
I think that’s more than just one person’s view, but nevertheless to the majority of UK voters still of working age this proposal will still seem like a good idea economically.
Would be logical to them. Since 2013 most workers now have auto-enrolment which is multitudes more beneficial than State Pension. However current pensioners and those due to become pensioners soon did not have this and other advantages in most of the years they contributed.
There’s actually only a spike of pensioners for about the next 20 years. After that things get easier.
But meanwhile as Ros Altmann says pensioners are a great political football. And social care as an issue is completely vast and needs its own attention and not linked with the football du jour.
Here’s Ros’s actual blog post which makes a good deal of sense right from the headline.
She’s too seasoned a wonk and been in charge of Pensions twice before. So she wasn’t going to accuse Andy Burnham of going for a soundbite or hearts and minds just before his Party Conference. But she has asked why did he pre-empt whatever the recommendations of the Pension Commission and of the Social Care Review will be, both of which are under way and both of which will report in 2027 
1 Like