The Labour party has launched a pensioners’ pledge card, promising to extend the triple lock until 2025, compensate some of those affected by increases in women’s state pension age, and to protect the pensions of UK citizens overseas.
The policy announcement featured a raft of promises that experts agreed were an attempt to boost the party’s popularity among older voters, but questioned their cost-effectiveness.
The 2015 general election saw Labour’s popularity among older generations dip significantly. Winning back that proportion of the electorate, with its high turnout, could be crucial to any future attempt by the party to gain power.
Introducing the pledges on Wednesday, shadow chancellor John McDonnell said it would show pensioners that Labour is committed to safeguarding their entitlements.
I am not convinced that the triple lock is necessarily unaffordable post-2020
Ian Neale, Aries insight
“It’s a national scandal that pensioner poverty is rising and the Tories are refusing to commit to keeping the triple-lock or compensate women worst affected by the speeding up in the state pension age,” the MP for Hayes and Harlington said on Wednesday.
Labour is yet to publish extensive details and costings for the execution of these policies, prompting concerns that the measures have not been properly thought out and may incur significant cost.
Steve Webb, director of policy at provider Royal London and former pensions minister, said changing levels of inflation and earnings mean it is difficult to judge the cost impact either way, but that this made the pledges look like a “shopping list”.
“It’s fine for political parties to make promises but you have to be confident they’ve been properly costed,” he said.
Locking down the triple lock
Chief among the unknown costs is the extension of the state pension triple lock until 2025, a full parliamentary term longer than the pledge made by the Conservatives before the last general election.
Introduced in 2010, the triple lock was designed to counter about 30 years of declining pensioner income in real terms. The link to earnings was abolished under the premiership of Margaret Thatcher.
The cost of the policy is largely dependent on other economic factors, Webb pointed out. In recent years low inflation has left the government with a large bill to pick up, but rising prices and earnings could see that fall.
“I am not convinced that the triple lock is necessarily unaffordable post-2020. Indeed, I find the speed with which it has been accepted as the conventional wisdom almost suspicious,” said Ian Neale, director of Aries Insight.
Nonetheless, many industry figures have called for the triple lock to be removed. Former pensions minister Ros Altmann has proposed a double lock of earnings and inflation, while the Work and Pensions Committee also called for it to be scrapped.
“The time’s come when the government has got to make up its mind about whether it’s a permanent thing or a temporary thing,” said Malcolm McLean, senior consultant at Barnett Waddingham.
He said there was even logic behind only retaining the earnings link, “on the basis that we want pensioners to be in line with the working population”.
What to do about Waspi
The promise to help those worst affected by the rise in women’s state pension ages looks equally problematic.
The Labour pledge remains relatively vague on the subject, but appears to focus on those women caught out by the coalition government’s speeding up of SPA increases in 2011.
Select committee urges government to scrap triple lock
Last year the Work and Pensions Committee called for the state pension triple lock to be scrapped, in an attempt to ameliorate an economy "skewed in favour of baby boomers and against millennials".
Finding a cost-effective way to remedy that could be tricky, particularly if it is to be a solution acceptable to the Women Against State Pension Inequality campaign.
“I’ve never yet got them to say what they actually want,” said McLean, adding that there was “not a cat’s chance in hell” of any government reversing the SPA back to 60 for the group concerned.
Pensions minister Richard Harrington has repeatedly said that the cost of implementing the “bridging pension” sought by many Waspi members would simply be too high to contemplate.
McLean suggested the worst affected might be helped out by giving them access to increased pension credit, a measure Labour outlined in plans last November. However, Waspi has previously rejected this solution.
Unfreezing the state pensions of UK citizens living in countries where reciprocal agreements have not been reached also implies large costs. Webb said it would require around £500m to fix, not including any new issues brought about by Brexit or the effect of past freezes.
