Maike Currie, VP Personal Finance, PensionBee, comments: “The triple lock will become a double lock. From April 2030, the earnings element will disappear, leaving the State Pension to rise by the higher of prices or 2.5%. Burnham says the State Pension will retain its value relative to earnings over the longer term, but without official earnings figures in the annual uprating formula, we need to understand how that commitment will work in practice. With inflation already above the Bank of England’s 2% target and vulnerable to external shocks such as higher energy and oil prices, an inflation-linked double lock could still prove expensive if no cap or control mechanism is in place. This is ultimately a trade-off: pensioners giving up the protection of the earnings element of the triple lock in return for greater protection from potentially catastrophic care costs. The State Pension is the foundation of retirement income for millions, while the unpredictable cost of care can quickly eat into pensions, savings and housing wealth built up over a lifetime. The personal is political, and for Andy Burnham the social care crisis is deeply personal. He spoke movingly about his grandmother, his late father and the care workers who looked after him, describing a system that has too often been invisible to the political class. Today he has put a price on trying to fix it. The triple lock will be honoured for the remainder of this Parliament, but the savings from moving to a double lock will help fund a National Care Service - an ambition Burnham compared in significance to the creation of the National Health Service. There is also the issue of tax. As the State Pension moves closer to the Personal Allowance, it makes little sense to give pensioners an increase with one hand only to claw some of it back in income tax with the other. The commitment that those on the lowest incomes will not be dragged into paying tax is therefore important.”
Kate Smith, Head of Pensions at Aegon, said: "We welcome the Prime Minister's decision to adjust the state pension triple lock, with a double lock from 2030. Thereafter the state pension will be increased by at least the increase in prices, or 2.5%, but holding its value relative to earnings. Aegon has long called for a serious conversation about how the state pension can remain affordable, sustainable, and fair across generations, so we’re pleased to see The Prime Minister leading the way and giving certainty for future state pension increases. It is important to remember that nothing changes for pensioners now. The government has reiterated that the triple lock remains in place until 2029. For millions of people, the state pension is the bedrock of retirement income and will continue to be so. Increases in earnings will still have a role to play, so pensioners are able to share in the relative prosperity and won’t lose out if UK earnings significantly outperform price increases. However, it’s unclear how this will work in practice. It could possibly involve an element of smoothing of earnings increases over a few years relative to the increases in prices and the 2.5% increase. We await the detail.”
Calum Cooper, Head of Pensions Policy Innovation, Hymans Robertson, says: “It’s clear that the debate around triple lock lasting indefinitely has, for now, been clarified by this government. Today’s speech from Andy Burnham clearly reiterated this governments commitment to change the current pension system with a commitment for triple lock to be in place until 2030. But, it’s now clear that the thinking about the state pension will move forward over the next few years. The most important question is not, however, what happens in this parliament, but what the long-term destination should be. Looking ahead, it sounds like the future vision will move to a more stable and sustainable ‘double lock’ mechanism, but we await more details on how this will work in reality. The change mentioned today is close to the approach suggested by the IFS, with a projected saving for the government in the billions.While at first glance this seems to be clear fiscal decision, to support the social care plans, the perception and reality of this are misleading. Currently state pension provides around 90% of the Pensions UK minimum retirement standards needed for the bare minimum of what is deemed a good retirement, with financial independence and dignity at its core. And this is expected to rise to near 100% within a decade. The perception of wealthy pensioners misses the vast swathes of pensioner poverty existing in the UK, and the government’s commitment to protect low-income pensioners was highlighted by the Prime Minister today. Pensions are built on the foundations of a social contract where each generation should expect to be no worse off than previous generations. Today’s speech, and subsequent timeline on future government thinking, is a chance to make changes in sustained planned manner providing hope for a future generation. It’s also certainty for the current generation of pensioners, and those who are within touching line of this. The Prime Minister has opened the right debate. The triple lock cannot sensibly continue for ever, but reform should not be a simple cost-cutting exercise. We need a clear adequacy target, protection against inflation and a credible long-term link to earnings.”
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