Keep the triple lock - but reform it
The Conservatives are committed to keeping the "Triple lock" to protect the value of the basic state pension for the rest of this parliament - but both the Conservatives and Labour appear to be reviewing whether to promise to continue the policy for the next one.
I believe that the state pension in Britain can and should be protected by a "triple lock" which ensures in a fair and sustainable way that the real value of the pension is protected and that it's real value must keep pace over time with that of wages and salaries as it failed to do in the nineties and the first decade of this century.
The problem is there are some issues with the detail of how the existing "triple lock" operates which mean that, in it's present form, it is not going to be sustainable in the long term.
The "Triple lock" should not be scrapped - but it must be reformed.
The present version of the triple lock made sense in 2010 when it was introduced after Gordon Brown's repeated smash and grab raids on pensioners' savings and investment - the intention was to keep it for ten years so as to improve the position of pensioners.
It has done that, but there is an issue with the way it currently operates which cannot be sustained forever and which, as it did during the pandemic, can fall foul of the law of unintended consequences.
It sets up a "ratchet" which guarantees that over time the relative position of pensioners will always improve compared with those in work - and it can never ultimately be sustainable to promise any section of society that their income relative to the rest of society will go on increasing for ever.
This is particularly the case when we look at the combined effect of the triple lock with the impact on younger and lower paid workers of what has been happening to house prices.
In 2020, when the real earnings of most people in work took a hit and some people took a massive hit, the "triple lock protected the value of the pension, which is exactly what it was supposed to do.
Then in 2021 average wages recovered by about 8% as the economy bounced back from the COVID recession. No sensible person would regard that as a genuine wage increase in any real sense - wage earners were just getting back some of what they lost.
But the triple lock formula, being very simple, didn't appreciate this, and would have given people on the state pension the bounceback from a hit which they never took. In the event the government made an exception to the triple lock policy.
But we need a triple lock in a form which is sustainable every year - "a triple lock" is of no value of it is abandoned whenever it does not suit the government, however good a reason they have (and they had an extremely good one in 2021.).
We do need a triple lock, it is necessary to ensure that the real value of pensions is always protected and that the pension keeps up with inflation and that there is an earnings link which ensures that pensions also keep up with wages.
But it would be much, much fairer if that earnings link were based on an INDEX so that the real value of the pension has to keep up with the long-term increase in wages and salaries rather than being tied to the annual changes which, as we saw in 2021, can produce ridiculous fluctuations and an unfair and unsustainable ratchet.
I wrote a piece on Conservative Home that year suggesting that the earnings element of the "Triple lock" should guarantee that the cumulative increase in the basic state pension must always keep up with the cumulative increase in wages and salaries, rather than making the calculation on a year-on-year basis.You can read that article by clicking on the link below.,
I would argue that the next Conservative manifesto should include a triple lock on pensions for the next parliament, but the earnings element should be based on an index, not the year-on-year change.
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