The triple lock guarantee of increases in the state pension should be abandoned to ensure the economic recovery from the coronavirus crisis is fair to working-age households, a think-tank says today.
The Social Market Foundation said that the huge economic cost of the emergency measures deployed to manage the epidemic must be shared fairly between old and young in the years ahead.
Huge government deficits are expected after the crisis, forcing ministers to reform and reduce state spending to help repay additional borrowing.
In a new briefing paper, the SMF said that any future austerity programme must not favour pension spending over working-age welfare, as happened after the financial crisis.
The triple lock is a legal guarantee that the basic state pension will rise in line with the lowest of earnings, inflation or 2.5%. The policy helped ensure that typical pensioner household incomes rose during the last decade, even as working-age households suffered almost no wage growth.
Replacing the triple lock with a “double lock” that removed the 2.5% promise would save £20 billion over five years, the SMF estimated, since pensions would rise in line with what are expected to be lower rates of growth in wages and prices. Those savings would help meet the huge costs arising from the lockdown.
The economic impact of lockdown policies is falling most heavily on working-age Britons, many of whom face redundancy followed by years of higher taxes, reduced services, and slow economic growth.
Lockdown policies have rightly been deployed to protect the lives and wellbeing of those most vulnerable to the virus, a group that includes older people. To retain social cohesion and public support, fiscal policy should demonstrate “reciprocity” for that support, the SMF said.
Maintaining the triple lock during the economic recovery would put an additional financial burden on younger workers and strain the social contract between the generations, according to Scott Corfe, SMF Research Director.
The report said:
“In the post-crisis world of slow, painful recovery, a triple lock ensuring a 2.5% minimum rise in pensions would constitute enormous generosity to pensioners, at a time when working-age adults face low or no wage growth and significant unemployment.
“In the context of an annual deficit that could reach £200 billion as we emerge from the crisis, shaving £4 billion a year from the growth of the £100 pension bill is not too much to ask. It would also demonstrate reciprocity from a group whose wellbeing was, rightly, prioritised during the lockdown phase of the crisis.”
Scott Corfe, the SMF’s Research Director said:
“Quite rightly, society is making sacrifices to protect its elderly right now. There is a clear case for intergenerational reciprocation when it comes to meeting the fiscal costs of the crisis in the years ahead.
“The crisis has emphasised our obligations to other generations, even in the face of personal sacrifice. This spirit must be maintained when the dust settles – with the economic costs of responding to the crisis shared fairly across the generations.”
I do not know who you are Nigel Barlow and to be honest I don’t care. But what I do think is you are probably a bit of a smart arse, with more education under your belt than the majority of us (not necessarily better education). Working from home (how very nice for you) with a piano in the background (not a 2 up 2 down then?) and a back garden. It must feel very nice to be able to pontificate about the dreadful situation that we are all enduring at the moment. Being a pensioner myself (state only) I am appalled that you pick the middle of a pandemic (primarily aimed at seeing off pensioners) to stand (or is that too much trouble) or sit on your upholstered soap box and attack the triple lock protection given to state pensions. Could you not just wait a couple of months to let us catch up with your perverted sense of ‘timing’, especially as most of us are eagerly waiting to see if we get an extra £3 – £4 a week in our pension ‘pots’ to cover the exorbitant rise in basic food costs over the last month? For example a simple tin of tomatoes has gone up from 35p to 55p (apply the triple lock calculation to that). Of course, we pensioners will take this on the chin, particularly at this time, when we are sat at our coffee tables hurriedly writing makeshift lists for our children informing them of who we owe money to, which bank we use, wiping the tears off the sheet wept in preparation of their sadness, what NOT to spend on our funerals, not forgetting naming who we want to attend, (I believe it is a maximum of 10). Yes, Nigel, Really Good Timing…
hello Carol,
If you read the article, it is not my opinion but that of a respected think tank that we are reporting on-If you also read the website, we raise a lot of issues around care for the vulnerable in society.Only yesterday we reported on the care home crisis with the headline “No-one should be abandoned to this virus simply because of their age, condition or where they live”
We also raise a lot of issues around how we pay for the lockdown, something that so far has been woefully neglected by the media.
Hi Nigel
I did not expect a response so quickly, thank you. But with respect your reporting should have in some way, pointed out that this ‘respected think tank’ are not living in the real world, the people coming up with these bright ideas are most probably the type of people who toss £3 in a homeless persons’ plastic cup without even looking down at them. Surely these people ‘in charge’ of this country should be realising what is happening in the minds of elderly people. Pensioners can read, can watch TV. The older generation are suffering terribly in this pandemic, they dont need someone whacking them on the back with threats about the dwindling pennies in their pockets while they are already at their lowest ebb. Talk about hitting a man when he is down? How about we pay for this lockdown by shutting down some of the parliamentary departments, Lords for instance, get rid of all the hangers on in ‘the political circus’ that is supposed to be looking after us. After all, havent we as state pensioners financed their shilly shallying for 45 years minimum.