Finance / Conservative plans for double lock on state pensions draw mixed reactions
Conservative plans for double lock on state pensions draw mixed reactions
19 May 2017
Conservative manifesto plans to replace the triple lock on state pensions with a double lock have drawn mixed reactions, with some saying the move makes sense and others describing it as a "bad call".
The triple lock currently ensures the state pension increases in line with wages, inflation or by 2.5% - whichever is highest.
But there have been mounting calls to scrap it, amid concerns over cost pressures.
The Conservative manifesto said the triple lock would be maintained until 2020 and it would then be replaced by a double lock, meaning pensions will rise in line with earnings or inflation.
The manifesto also says the Conservatives would ensure that the state pension age reflects increases in life expectancy.
A recent review by former CBI director-general John Cridland recommended that the triple lock should be withdrawn in the next Parliament.
Tom McPhail, head of policy at Hargreaves Lansdown, said: "This is largely what we expected. The triple lock has largely done its job in improving pensioner incomes in recent years and protecting the retired population from the effects of the post 2008 recession.
"A double lock still provides a more robust level of security than is enjoyed by the majority of the working population."
Mr McPhail said the plans have "ducked" until after the election the question of how far and how fast state pension ages will rise.
He said: "Those aged in their early 40s and below should brace themselves for another year or two of work before getting their state pension; age 70 still looks on the cards for those in their 20s and 30s."
TUC general secretary Frances O’Grady said: “The triple lock was meant to restore the state pension after it spent decades falling behind wages. That job isn’t finished. This is a bad call.”
Richard Parkin, head of pensions policy at Fidelity International, said: “The decision on triple lock makes sense. It was always an arbitrary way of reducing pensioner poverty.”
He continued: “It’s not clear though that the removal of the 2.5% underpin will save a lot of money in the near term given price and wage inflation expectations are rising.”
According to the Institute for Fiscal Studies (IFS), moving to a double lock “does little to resolve the pressures an ageing population will put on the public finances over the years to come”.
The IFS said: “The fundamental reason for this is that it is pretty rare for both average earnings and inflation to be below 2.5%. Hence getting rid of the 2.5% element of the triple lock does little to change the projected long-run generosity of the state pension.”
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, said: “The problem with switching off the triple lock for all pensioners is that there are many older pensioners who are by no means well off.
“Many draw little more than a basic pension of around £120 per week, and the triple lock has given them an important boost. A better strategy would be to retain the triple lock for existing pensioners but end it for the newly-retired, who are on average more than £100 per week better off than their older counterparts.”