Think beyond five years
Editorial: Government announcements bringing bad news for pensioners tend to be few and far between – even more so now. With elections imminent, Theresa May has to at least attempt to hide any intention to reduce pensioner benefits.
Yet her evidently evasive response when asked in prime minister’s questions to back the triple lock is widely read as a sign that she intends to scrap it, and she has since added to this suspicion in TV interviews.
It is often argued that the triple lock has now done its job of bringing state pensions back in line with earnings. And the fact that pensioner incomes have, when adjusted for household size and housing costs, overtaken those of the working age population would support such a view.
The problem is that this development will almost certainly reverse quite dramatically over the coming decades.
It’s also worth comparing UK spending on state pensions with other countries. In 2015, the UK spent 5.6 per cent of GDP on the state pension, OECD stats show; this compares with more than 10 per cent for countries such as Germany and Finland, and is lower than the 6.7 per cent of GDP the US spent. The OECD average was 7.9 per cent of GDP.
The fact that the UK still has one of the lowest net replacement rates among developed nations should also make politicians think twice about removing a level of guarantees from the increases. Continuing to bring UK state pensions up to par would show awareness of what some in the industry refer to as a pensions time bomb, which current auto-enrolment contribution levels will not be able to defuse.
The prime minister has also seen an opportunity to profit from the nation’s outrage over BHS and the media’s portrayal of the executives involved, by vowing to better protect pension schemes from company bosses. Our blog gives further comment on this.
To give you a good idea of where the different parties stand on pensions, we are running a series of interviews with party spokespeople, starting this week with Labour MP Alex Cunningham.
Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.