Margaret Thatcher removed the link between state pension and earnings in 1980
By 2020 the single-tier state pension will be worth at least £167 a week if the triple-lock remains, and its value is likely to edge closer to 26% of average earnings – the same as in 1980
Scrapping triple-lock comes with political health warning
AJ Bell senior analyst Tom Selby says:
“While policymakers were never clear about the exact aim of the triple-lock, a key consideration in its introduction was the fact pensioner incomes had, in many years, increased at a derisory rate after Margaret Thatcher abolished the earnings link in 1980.
“At that point, the basic state pension was worth around 26% of average earnings. However, Mrs Thatcher’s intervention saw its value steadily decline to just 16% of earnings in 2008. In 1999, the basic state pension rose in value by just 75p.
“The new single-tier state pension is worth £155.65 a week in today’s prices. If it rises by 2.5% a year between now and 2020, it will be worth around £167 a week. If average earnings growth remains below 2.5% during that period, the state pension will edge even closer to being worth 26% of average earnings. And if inflation shoots up as some believe it will, the triple-lock could push it beyond this level.
“If the aim of the policy was to ‘right the wrong’ of Margaret Thatcher’s intervention in 1980, then you could argue it’s job done – although it’s worth remembering most people who accrued state pension rights under the old means-tested system will not receive the ‘single-tier’ amount.
“However, never underestimate the power of the grey vote – it will be a brave political party that enters the next general election with a promise to hit pensioners’ pockets. One possible get-out would be to establish a short, sharp, independent review of the triple-lock to determine whether it should stay in place and, if so, for how long. John Cridland is currently conducting an independent review of the state pension age on behalf of the Government – there is no reason this could not be expanded to include its value as well.”