In a report released on 6 November 2016, the influential Works and Pensions Select Committee has recommended that the UK state pension “triple lock” by scrapped by 2020 and replaced with something more affordable like a link to just average earnings. The rising cost of the state pension – £98 billion in the last year – is simply deemed unsustainable.
The triple lock was introduced in 2010 and links annual state pension increases to the highest of inflation, CPI or 2.5% p.a. It was brought in as a means to help increase the state pension back to levels before the 1980s when the UK government removed the link to earnings.
The Works and Pensions Select Committee has argued that the triple lock benefits baby-boomers and “it is now the working young and their children who face the daunting challenge of getting on in an economy skewed against them”.
Chairman of the committee, Frank Field, explained that for millennials “at the same time as tightening their belts, they are being asked to support a group that has fared relatively well in recent years.” Millennials will be the first generation to be “poorer than their forebears”.
However, the TUC policy officer Tim Sharp feels that the triple lock must remain in place for another “three decades” in order to bring the levels of payment up to 1980s levels. He has noted that the average recipient of a basic pension currently receives 14.9% of average full time earnings. This is in contrast to 26% in 1979.
Whether or not the government will consider changing the way in which the UK state pension is escalated remains to be seen. As the triple lock was a manifesto promise, it may be reticent to make changes ahead of a 2020 election.
Photo by robertsharp at flickr.com