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Is triple lock the best way to protect pensioners?

The triple lock on state pensions was introduced in 2011 to protect pensioner incomes. 

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Government must commit to ongoing protection, but they can consider a double lock
Government must commit to ongoing protection, but they can consider a double lock

Over many years, the basic state pension had fallen significantly behind general increases in income for the whole population and the coalition government committed to increasing state pensions by the highest of earnings inflation, price inflation or 2.5 percent, each year. which resulted in a welcome reduction in pensioner poverty over time.

 

However, the reality is that this policy has serious shortcomings. It fails to protect the poorest and oldest pensioners, while offering top protection to those who reached pension age since April 2016 and are still in their 60s.

 

If the aim is to protect pensioners, then surely national resources should be focussed on the poorest? But that is not how the triple lock works.

 

The triple lock only applies to the £134.25 old basic state pension. This is received by those who reached state pension age before April 2016, i.e. the oldest ones who are already aged over 70.

 

The old state pension system paid two elements – a basic flat rate amount plus additional earnings-related elements, including state second pension (S2P) and the state earnings related pension scheme (SERPS). The full basic state pension is £134.25 and only that part is covered by the triple lock. The additional S2P and SERPS only increase in line with price inflation.

 

In contrast, the triple lock covers full £175.20 new state pension which was introduced in April 2016. This joins together the old basic and additional pensions into one payment. So, those reaching pension age since April 2016 can get a new state pension of £175.20, which is fully covered by the triple lock.

 

Therefore, the youngest pensioners have £175.20 of their state pension triple locked, but older pensioners only have £134.25 protected in this way – over £40 a week less protection.

 

Triple lock does not cover pension credit

Pension credit is the payment which ensures those pensioners who are at most risk of poverty can claim means-tested pension credit, which tops up any state pension or other income they are receiving to £173.75 a week - but this is not covered by the triple lock.

 

Pension credit only has to rise in line with earnings inflation, therefore excluding the poorest pensioners from triple lock top protection. If prices rise by more than earnings, and if both are below 2.5 percent, pension credit for the poorest pensioners may fall behind other pensioners and the rest of society.

 

Of course we must protect pensioners, but is this triple lock the appropriate policy? Providing less protection to the least well off does not seem logical – and the 2.5 percent element does not have economic or societal logic. The rationale seems to have become entirely political.

 

Of course it is vital to protect pensioners, and I would hate to see any return to the widespread pensioner poverty that we have worked hard to overcome. However, with the introduction of the new state pension, and after the latest crisis, it seems time to move on.

 

Government must commit to ongoing protection, but they can consider a double lock to increase by highest of earnings or price inflation. This would seem more justifiable in policy terms, ensuring state pensions rise in line each year with the best of earnings or price inflation. And this needs to apply to pension credit too.

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