Sarah Coles, head of personal finance at AJ Bell, comments: “Proposed changes to the triple lock have put the cat among the pigeons, but these figures show that something has to give. There are 285 people of pensionable age for every 1,000 working people, and the number of births has dropped, so without change of some sort, it would mean fewer working people footing the bill for increasing numbers of pensioners.
“The triple lock in its current form would mean that over time those pensions got more generous too. Spending on the state pension is now £16 billion a year higher than it would have been without the triple lock. Keeping everything as it is would be likely to mean a rise in taxes for working age people and an impact on broader public services.
“The government has two levers to pull. It can raise the state pension age again to rebalance the numbers. At the moment, the state pension age is increasing to 67, but then it’s not set to rise to 68 until between 2044 and 2046. However, the government is currently reviewing the state pension age, so this date isn’t written in stone and it could speed this up.
“The problem is that we’re spending more of our later life in ill-health. It means a higher state pension age could simply mean more people relying on working age benefits later in life, before their state pension kicks in, adding to the benefits bill.
“The other lever is the triple lock, which is why the government is under pressure to pull it – quite aside from being a mechanism to help pay for care. A change isn’t nailed on, because the government will have to sell the idea to the electorate in a General Election. Given it’s such a key part of millions of retirements, it will be a hard sell. It’s one reason why political parties have shied away from addressing the issue for so long, despite growing criticism of the cost of the pledge and the potential intergenerational unfairness it is baking into the system.
“Now the government has acknowledged that the triple lock can’t exist forever, there’s an opportunity to open the debate as to what the state pension should look like in future, when people should get it, and what it will cost. Finding these answers will give people the certainty they need to make long-term plans for their retirement.”
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