Older generations are in firm support of the Government maintaining the pensions triple lock, but support wanes among younger generations, new research from AJ Bell has revealed.
Four in 10 (38%) people believe the triple lock should be made permanent, compared to 6% who want it to be scrapped.
However, there is a significant generational divide. Over two-thirds (68%) of Baby Boomers believe the triple lock should be made permanent, while just 22% of Millennials say the same. This number slips further to just 14% among Generation Z.
The promise, which guarantees that the pension will rise by the highest of inflation, earnings growth or 2.5%, has already added around £12 billion a year to the cost of the State Pension since it was introduced in 2011, according to the Institute for Fiscal Studies.
Tom Selby, director of public policy at AJ Bell, said: “Politicians of all stripes remain steadfastly wedded to the State Pension triple-lock, despite growing criticism of the cost of the pledge and the potential intergenerational unfairness it is baking into the system.
“Given the obvious challenges facing public finances, any other policy which had added £12 billion to Exchequer costs and which, by its nature, creates huge uncertainty over future costs would be under real scrutiny.
“The reason is almost certainly cold political calculus. A significant section of the public support the triple-lock, particularly older voters, and any party indicating it will not pledge allegiance to the policy risks being annihilated at the general election. With inflation running hot, there may also be a feeling that the 2.5% underpin might not kick in for a while, meaning there are no guarantees ditching this element in favour of a ‘double-lock’ will actually save any money in the short term.”
However, Selby said it was unlikely that any government would pursue making the triple lock permanent, warning that the long-term result of such a move would be that the State Pension would eventually reach and then exceed average earnings in the UK in a move that would be unaffordable for the Government.
Selby said in order to set a path for the triple-lock to eventually be retired, this trade-off needs to be “clearly explained” to people.
“Assuming the Treasury does not want spending as a share of GDP on state pensions to continue ballooning – squeezing the ability to spend elsewhere or reduce the tax burden on the working population – there are two main levers available to control costs: the amount people receive from the State in retirement and the age at which they receive it. If you can’t pull the ‘amount’ lever, then the only option left is the age; a shift that would only impact younger generations.
“The starting point needs to be setting out what the triple-lock is aiming to achieve and establishing a path to reach that goal. At that point, the promise can be shifted to either a single or double-lock to earnings and/or inflation, with a strong argument for smoothing out these measures over time to avoid the unpredictable spikes we have seen in recent years.
“This would at least provide a degree of stability, giving people a better idea of what the State will provide and from when, and what they need to build up for themselves to fund the retirement they want. But that first step of acknowledging the triple-lock simply cannot exist forever may be the hardest.”
