Labour leader Jeremy Corbyn has committed to protecting the state pension triple lock, in a speech given at the party’s conference in Liverpool.
Corbyn (pictured) said he wanted to appeal to the older generation who “rebuilt our country after the war, kick-started our economy, built our NHS and created our social security system”.
He said: “We owe it to you, the older generation, to rebuild Britain so you too have peace of mind and dignity. And we will fulfil that obligation with the triple lock on pensions protected along with the winter fuel allowance, a free bus pass and a national health and care service that can look after you and your families with respect.”
The triple lock means the state pension increases each year by the higher of inflation, the increase in average earnings or 2.5%.
The policy has come under fire for being “unaffordable” and “increasingly unfair”, with the likes of former pensions minister Ros Altmann and Work and Pensions Committee chair Frank Field suggesting it should be scrapped.
Prior to last year’s general election, the Conservative’s confirmed plans to replace the triple lock with a ‘double lock’ by 2020, which would see the basic state pension rise in line with earnings or inflation, depending on which is highest. It would do away with the guaranteed 2.5% state pension increase under the current system.
‘Costs could spiral’
AJ Bell senior analyst Tom Selby said committing to the policy was both politically difficult and potentially expensive.
“We know is that the amount of the state pension increased by 22.2% between 2010 and 2016, compared to earnings growth of 7.6% and CPI inflation of 12.3% over the same period,” he said.
“If the triple lock is retained over the longer-term, the costs could spiral, with estimates from the independent Office for Budget Responsibility suggesting extra spending of £35bn in today’s terms if the triple-lock is retained by 2060/61, versus £15bn under earnings indexation only.”
Selby added it was a hard policy to justify politically, as it would mean increasing the retirement incomes of baby boomers at a faster rate than younger generations.
Meanwhile, Aviva head of savings and retirement Alistair McQueen said it was the responsibility of a government to get the balance right between generations.
“Today, wage growth and price inflation is above 2.5%, so the triple lock is not needed. But the Bank of England and most other commentators expect inflation towards 2% from 2019. This would force the 2.5% lock to kick in, significantly increasing the cost of the state pension and diverting the UK’s limited resources from elsewhere,” he explained.
“The Organisation for Economic Co-operation and Development (OECD) however reports that levels of poverty among those over the age of 66 in the UK is above the OECD average, and the state pension continues to be the biggest source of income for those in retirement. The need for state support for pensioners remains strong.
“There is a need to support all in society – young and old. But the same pound can’t be spent twice. A system which forces expenditure in one area – such as the state pension – removes it from another – such as housing for the young.”