Commenting on the DWP's announcement that Government will be spending an extra £45bn on state pensions over next 15 years, driven by re-instatement of the earnings link, Dr Ros Altmann, Saga's Director General, comments:
"The Government's figures sound good, but it is important not to be misled. The reality is that our State Pension is not good enough and must be improved to provide a decent basic minimum income for pensioners.
The Government's study highlights also that it is only the Basic State Pension that has the 'triple lock'. In fact, this £45bn figure is crucially dependent on the assumptions used and, if earnings growth is lower than the 4.9% annual increase assumed by the study, then the extra spending on State Pensions could be lower than it would have been under an RPI link.
"If earnings growth is, say, 3% a year, rather than the DWP's stated figure of 4.9% this will actually result in the Basic State Pension being lower than under a RPI link. In addition, the additional parts of the state pension will also be lower than using rpi, so we do have to be careful when interpreting these forecasts.
"The most important thing is to reform our state pension properly, to have just one simple payment that keeps up with the rest of the economy in a fair and transparent manner. It must get rid of mass means-testing and ensure pensioners understand what they will receive from the state. Even under the new 'triple lock' the old complexities remain and the state pension will still be too low."
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