09 Nov 2020
The UK government should scrap the triple lock on state pensions, says the Association of Accounting Technicians (AAT), and increase it in line with the Consumer Price Index (CPI).
The AAT’s recommendation was included in its response to the inquiry by the Treasury Select Committee into coronavirus and tax, which said that the measure “would continue to provide annual increases that ensure older people are able to live with dignity and the respect they rightly deserve whilst simultaneously saving £6bn for British taxpayers by 2024-25”.
The triple lock on state pensions means that the benefit increases every April by the higher out of earnings growth, CPI inflation or 2.5%.
The report went on to add: “According to the Office for Budget Responsibility (OBR), post-coronavirus earnings are predicted to grow by almost 20% in 2021 following their collapse during the coronavirus crisis this year.
"No government will increase the state pension by 20% no matter what manifesto commitments may have been made. So, there is an immediate urgency dictating change.
“This situation must be taken advantage of for the sake of the wider economy and in the interests of fairness to all taxpayers.”
Other pensions-related steps included in the response involved scrapping higher rates of pensions tax relief and introducing one 20% rate for all, according to a Pensions Age report.
AAT added that this would mean a reduction for higher earners, basic rate payers would receive the same level of protection and a £13bn annual dividend for the taxpayer.
Furthermore the report indicated that people receiving the state pension who were still working should no longer be exempt from paying national insurance contributions, saying there was “little justification for maintaining this”.
The Association added that should this measure come into effect, it would generate over £1.5bn each year.
Moreover, the organisation said it had published the report because of the "unprecedented havoc" that coronavirus had wrought on the UK economy.
The report stated: "This would have been a major challenge for any government even if the economy was in a healthy state prior to the pandemic. The reality is that the British economy was already heavily indebted and so the impact of coronavirus will be even more acutely felt.
"Indeed, the debt accumulated due to coronavirus has pushed national debt beyond 100% of gross domestic product and it now stands at more than £2trn for the first time in British history.
"Against this backdrop, the need for action is clear. Policymakers will likely favour higher taxes or lower spending or perhaps increased borrowing depending on their political ideology, but the harsh reality is that irrespective of political persuasion, a combination of the three is necessary to deal with the enormous scale of debt."