Labour commits to state pension triple-lock – AJ Bell

by | Feb 20, 2024

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Labour has committed to retaining the state pension triple-lock if it wins the general election, according to reports.

Tom Selby, director of public policy at AJ Bell, comments: “Given Sir Keir Starmer has been taking a safety-first approach to this general election campaign, it is no surprise Labour has decided to commit to the state pension triple-lock. Any shift away from the pledge, however sensible, would have risked being the centre of an attack campaign by his political opponents. Given the importance of securing support from older voters, sticking with the triple-lock is likely viewed as the easiest option politically.

“That does not mean the decision represents good policy, however. Any politician that advocates maintaining the triple-lock is effectively admitting the state pension is too low. But rather than putting in place a plan to increase the value of the state pension to a level deemed ‘fair’, the triple-lock randomly ratchets up the state pension in real terms depending on earnings growth and inflation at a specific point in time each year. This approach has proven extremely volatile in recent years as inflation and earnings have spiked, meaning the cost to taxpayers each year has been both significant and unpredictable. 

 
 

“The triple-lock has become a totem for ‘doing right by older people’, but as it increases the cost of the state pension, there is a risk planned rises in the state pension age will need to be accelerated to balance the books, embedding intergenerational unfairness into the system.”

Reaching consensus key to state pension certainty

“There are sensible alternatives to the triple-lock which need to be seriously considered. For example, the Institute for Fiscal Studies’ recent suggestion that government sets out what the state pension should be worth in relation to median earnings is a sensible one. It would certainly be a much more coherent way forward than the current approach, which is entirely aimless. Once you have set a clear goal for the value of the state pension, you can plot steady increases to reach that value. Similarly, building greater certainty into future state pension age increases would help give savers confidence that the goalposts won’t be moved.

 
 

“At some point soon, the government will need to come clean with voters about the state pension, rather than blindly committing to the triple-lock forever more. Failure to do this will mean the state pension remains mired in uncertainty. An independent review with cross-party support feels like the only way to break the hold the triple-lock has on discussion about the future of the state pension. Politicians need to be brave enough to kick-off an honest debate about what the state pension is aiming to deliver in retirement, how it should look over the long term and the associated costs. Without that, we risk remaining in a triple-lock-induced Groundhog Day where the only real question is whether or not that policy will be retained.”

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