Call to Scrap ‘Triple Lock’ on Pensions Due to COVID-19 Crisis

The coalition policy that has led to state pensions outpacing wages should be scrapped, according to the Social Market Foundation (SMF).

The SMF said scrapping the policy would alleviate the costs of battling the coronavirus crisis. The thinktank argues that the cost of the emergency measures being put in place to handle the pandemic should be shared equally between generations.

It also believes that the large government deficit that is being anticipated could be plugged by scrapping the ‘triple lock’ guarantee on state pension rises.

“Quite rightly, society is making sacrifices to protect its elderly right now,” said Scott Corfe, the SMF’s research director. “There is a clear case for intergenerational reciprocation when it comes to meeting the fiscal costs of the crisis in the years ahead.

“The crisis has emphasised our obligations to other generations, even in the face of personal sacrifice. This spirit must be maintained when the dust settles – with the economic costs of responding to the crisis shared fairly across the generations”.

The coalition government introduced the triple lock for the basic state pension in 2011. It guarantees that it will rise by a minimum of either the rate of inflation, average earnings growth, or 2.5%.

Prior to 2011, the state pension would rise in line with inflation or the retail prices index. These were consistently less than the rise in annual earnings.

In 2017, Institute of Fiscal Studies analysis showed a 22.2% growth in the value of the state pension between April 2010 and April 2016. Prices grew by just 12.3%, and earnings grew by just 7.6% in the same time period.

The SMF argues that unlike what happened after the 2008 financial crisis, any potential austerity programme in the future should not favour pension spending over working-age welfare.

The economic burden of the lockdown is falling mostly on those of working-age, according to the SMF, “many of whom face redundancy followed by years of higher taxes, reduced services, and slow economic growth”.

The SMF believes that the triple lock should be replaced with a ‘double lock’ that removes the promise of 2.5%, and could potentially save £20bn over a five year period.

“In the context of an annual deficit that could reach £200bn as we emerge from the crisis, shaving £4bn a year from the growth of the £100bn pension bill is not too much to ask. It would also demonstrate reciprocity from a group whose wellbeing was, rightly, prioritised during the lockdown phase of the crisis,” said the SMF.