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5 June 2020

How I learnt to relax, stop worrying and love the triple lock pension

I increasingly think that the policy is George Osborne's best legacy as Chancellor.

By Stephen Bush

I have done a U-Turn. I used to be a big critic of the triple lock pension — the commitment to increase pensions by whichever is higher: growth in national average earnings; growth in retail prices as measured by the Consumer Price Index; or 2.5 per cent.

I bought into a common misconception about the policy: that it primarily benefits pensioners in the here and now, who for a variety of other happy reasons have already been the beneficiary of a number of positive policies.

This is not true — as far as the politics of the triple lock are concerned, it may well be true that it is pensioners who believe they are hurt by changes to the triple lock. But the biggest losers to changes in the triple-lock are people who will receive their pensions many decades from now. Why? Because it is future pensioners who will see the largest number of increases thanks to the policy. Today’s pensioners get comparatively little.

In addition, I am increasingly convinced that while life expectancy will continue to increase, the years in which we can work full-time probably won’t, or at least not to the same degree. Today’s thirty-somethings are likely to live into their late 80s and early 90s. It seems likely that the average 30-year-old will be able, perhaps even keen, to work until they are 70 or even 75 — but that still leaves them with 25 to 30 years of life in which only the strength of their pensions is going to prevent them seeing out their final years in backbreaking poverty.

I’ve also been won over by Chris Dillow’s repeated arguments in favour of the policy and its overall benefits, as well as the arguments for the policy advanced by politicians and their advisors across the spectrum. 

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If you want to cut the triple lock, that’s your look-out: but we need to be clear on who the biggest losers are, rather than doing it on the misguided grounds of intergenerational fairness.