Triple lock on state pension could be axed after Chancellor orders a review into how much the guarantee costs.
The future of the pensions triple lock was thrown into doubt last night after the Chancellor signaled a review of the costs of the guarantee.
The triple lock, introduced under David Cameron, ensures that the state pension goes up every year by inflation, earnings growth or 2.5 per cent, whichever is the highest.
But it has led to claims that pensioners are being cushioned from cuts while younger people are bearing the brunt of austerity.
Philip Hammond told MPs he would be compiling a major report into the impact that state spending on pensioners has on the health and social care of an ageing population. The Treasury later confirmed that the review would look at whether the triple lock is affordable. It could also consider whether wealthier pensioners should continue to benefit from handouts such as the winter fuel allowance and free bus passes.
However, Mr Hammond said no changes would be made until 2020.
Former pensions minister Baroness Altmann is among those who have called for the triple lock to be scrapped, saying that increasing payments so far above the rate of inflation is unaffordable. But yesterday groups representing the elderly said that by ‘attacking’ the guarantee, the Chancellor was ensuring the state pension would wither on the vine as it did under Margaret Thatcher.
Mr Hammond promised to honour the Tory manifesto pledge to keep the triple lock until the next election. But he added: ‘As we look ahead to the next Parliament we will need to ensure we tackle the challenges of rising longevity and fiscal sustainability.
And so the Government will review public spending priorities and other commitments for the next Parliament in light of the evolving fiscal position at the next spending review.’ The Treasury later confirmed this included Tory manifesto commitments such as the triple lock.
Officials are concerned about the effect of people living longer on the nation’s finances.
Fears that there will not be enough working-age people to fund pensions and care for older people has already led to an increase in the state pension age – and a review to see whether it should be increased yet further. The separate review unveiled by the Chancellor will consider how much will be needed in future to pay for the health and social care needs of the ageing population.
It will look at issues such as the cost of the triple lock, and possibly other benefits such as free bus passes and the winter fuel allowance, which some say should be taken away from wealthy pensioners.
It is believed the review will take place in 2018 and will inform the spending review the following year.
Last night Baroness Altmann welcomed the review, saying: ‘The Chancellor’s speech signalled pretty clearly that the triple lock is only safe until 2020. I would like to see a double lock announced, whereby state pensions would rise in line with either earnings or prices.’
But Dot Gibson, general secretary of the National Pensioners’ Convention, said: ‘It’s clear that the Chancellor intends to attack the state pension triple lock after 2020.
‘Putting aside all the misinformation surrounding the triple lock – it will only offer a £3 a week rise next April and just £1.80 for millions of older women – the inadequacy of the state pension certainly won’t be solved by 2020 if this is how we intend to go on.
‘Future generations are also going to become ever more reliant on the state pension for their income in retirement, so if we scrap the triple lock the state pension will wither on the vine like it did in the 1980s and they will be left with nothing.’ Nici Audhlam-Gardiner, from Saga Investment Services, said: ‘It looks as though 2020 could see the end of the triple lock and maybe more as the Chancellor indicated he would be looking at the cost of an ageing society in the next Parliament.’
Jon Greer, pensions expert at Old Mutual Wealth, said: ‘While the removal of the triple lock is politically toxic, it is fiscally unsustainable and logical that it be removed eventually.’
Read the original story on the Daily Mail.