Conservatives to end state pension triple lock

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23 May, 2017

Conservatives to end state pension triple lock

The Conservatives will abandon the state pension triple lock after 2020 and replace it with a new double lock, the party's general election manifesto revealed last week.

The double lock will mean that state pensions will increase in line with earnings or inflation, whichever is highest.

Contrary to Labour's manifesto, which plans on freezing the state pension age rises at 66, the Conservatives revealed they will increase the state pension age in line with growing life expectancy if they are re-elected to government on 8 June.

Hugh Nolan, President of the Society of Pension Professionals and Director at Spence & Partners, said: “The triple lock is unsustainable with our ageing population and so it is good to see the Conservative Party being honest about this uncomfortable truth.

"Pensions look like a typical battleground for this election with Labour promising benefits that might be unaffordable, the Lib Dems flying the flag for equality, and the Tories being ruthlessly realistic,” he added.

David Robbins, Senior Consultant at Willis Towers Watson, said the Office for Budget Responsibility assumes that, in the long term, the triple lock has the same outcome as increasing the state pension by earning plus 0.34% every year.

Using its methodology, the state pension double lock works out at earnings plus 0.26%. 

So, Mr Robbins said the value of affected state pensions would still be increased relative to average earnings, just by a bit less.

He said: "The 2.5% part of the triple lock doesn't make any sense as a policy, but it served a political purpose: it was there to avoid a repeat of the 75p per week increase in the basic state pension that Gordon Brown awarded in 2000, when inflation was low”. 

"Seventeen years on, (Conservative leader and prime minister) Theresa May used that 75p increase as a stick to beat Labour with in the final prime minister's questions before the election”. 

"So, it is hard to see her sticking rigidly to the double lock if inflation and earnings growth were both very low”.

The manifesto also stated the Conservatives will "ensure that the state pension age reflects increases in life expectancy".

Willis Towers Watson's Mr Robbins pointed out "that could mean anything - it is how those increases are reflected that matters. The fastest timetable that the Conservatives were considering before the election would see the state pension age rise to 68 in 2030 - just in time to catch the population bulge from the 1960’s baby boom”.

One significant omission from the manifesto is any mention of tax relief.

Mr Robbins warned: " When it comes to the future of tax relief, election campaigns are more significant for what politicians rule out than for what they rule in and it looks as though a re-elected Conservative government would have left itself the flexibility to consider all options”. 

"If change is seriously considered, the Pension Isa model looks the most likely option, with the Lifetime Isa - which the manifesto flags up - providing a foot in the door for this”.

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