- The government should set a clear pathway for state pension increases before ditching the ‘triple-lock’, respected think-tank the Institute for Fiscal Studies (IFS) argues (The future of the state pension | Institute for Fiscal Studies (ifs.org.uk))
- Ministers urged to set out an appropriate level for the new state pension in relation to median earnings
- The new state pension is currently worth £10,600 a year, around 30% of median earnings, and will rise to over £11,500 a year in April 2024
- In addition, the state pension age should only rise when life expectancy rises, the IFS says
- AJ Bell has long called for clarity and consistency over state pension policy
Tom Selby, director of public policy at AJ Bell, comments:
“The state pension is supposed to be the bedrock upon which people can build their retirement plans. However, uncertainty over both the value of the state pension and when people can expect to receive the benefit undermines confidence in the system. The state pension and wider retirement savings policy are all-too-often caught in the mire of politics, with decisions made based on short-term priorities rather than with the aim of giving people long-term certainty.
“The state pension triple-lock is a classic example of this. This policy, introduced over a decade ago by the coalition government, is both generous and entirely aimless. Yet there is every chance we will go into the general election with all major political parties committing to the triple-lock in their respective manifestos. While this might be good news for pensioners in the short-term, it will mean the debate over what the state pension should be worth and when it should be paid to people is kicked down the road again.
“The IFS’ 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 plan than the triple-lock, which randomly ratchets up the value of the state pension depending on earnings growth and inflation at a specific point in time each year. Similarly, building greater certainty into future state pension age increases would help give savers confidence that the goalposts won’t be moved.
“An independent review with cross-party support may be necessary 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.”
