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16 November

There is no justification for the triple lock on pensions

Millionaire pensioners are subsidised by the people who clean their homes, and Rishi Sunak knows it.

By Rachel Cunliffe

Rishi Sunak wants the country to know that he is thinking about pensioners. Jetting off to the G20 summit in Indonesia, the Prime Minister found time to tell reporters that pensioners “will always be at the forefront of my mind”. That’s a telling comment just days away from an Autumn Statement in which his Chancellor is preparing to slash public spending and increase taxes for all. On Sunday Jeremy Hunt solemnly announced he “will be asking everyone for sacrifices” – now Sunak is sending out a very strong hint that for the over-65s any sacrifices will be minimal.

This suggests that the triple lock on state pensions is almost certainly remaining. To recap: the triple lock ensures that the state pension rises every year, by the consumer prices index (CPI) rate of inflation, the rate of earnings growth, or 2.5 per cent – whichever is highest. This means that pensions keep rising even when growth is low or non-existent (as has been the case for much of the last decade), and are protected when inflation suddenly spikes, as it just has. It was suspended as a one-off last year to avoid distortion caused by wages falling in the first year of the Covid-19 pandemic and then bouncing back, but it has otherwise been one of the few constants in British politics.

This is great if you’re over or nearing the age of retirement. For the people who actually have to pay for it (taxpayers, primarily those of working age), the bill is eye-watering. Inflation, lest we forget, is currently 10.1 per cent. Wages are only increasing by about half that, at 5.5 per cent. It is estimated that raising the state pension in line with inflation instead of earnings would add an extra £5bn to the bill. For context, that’s about 10 per cent of the total amount of savings and tax rises that Hunt is trying to find in his statement on Thursday.

And context is important here. The triple-lock has become one of the Conservative Party’s most cherished totems. From the way it’s spoken about, you’d think it had been a cornerstone of the UK welfare system forever, rather than being introduced in 2010 (meaning that most of those currently receiving a pension had to pay far less to fund the retirements of the generations above them).

You might also assume that this particular demographic – the retired – are especially vulnerable. That’s certainly the implication of Tuesday’s Mirror front page, for example, on which the actor Ricky Tomlinson warns “Axe the triple lock… and people will die”.

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Tomlinson does have a point. Some pensioners live in abject poverty, and in the midst of a cost-of-living crisis with energy prices nearly double what they were last winter, it is essential that they are given the support they need. Again, however, we must look at context, because the same could be said of many households, regardless of age. On 15 November the Guardian reported the tragic story of a two-year-old child who died of a respiratory condition caused by mould in a flat with poor heating and ventilation. Acute poverty costs lives, and it does not respect the age of retirement. About 18 per cent of pensioners lived in poverty in 2019-20, according to the Office for National Statistics, which is lower than the average poverty rate across the general population of 22 per cent. The poverty rate for children, meanwhile, is 31 per cent.

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Debate about the triple lock rarely acknowledges that. Nor does it acknowledge that, according to research done by the Resolution Foundation, the living standards think tank, working households with children have seen their income fall by an average of £375 a year thanks to welfare changes since the Tories won power in 2010, while pensioners have seen theirs rise by £510 a year. There have been hints that, after much wrangling, Sunak and Hunt intend to increase working-age benefits in line with inflation in Thursday’s statement, but the damage has already been done over the last decade. Working-age adults and children have borne the brunt of Conservative policies and they are, apparently, not at the forefront of Sunak’s mind.

Even accepting that all vulnerable households should be given support regardless of age, we need to be frank about who is paying for that support. While there are rumours that Hunt plans to increase the national living wage to keep up with inflation, workers on average are getting pay rises of just half that. In the public sector, where wages have been basically frozen for most of the past decade, they’re getting even less. Steve Barclay, the Health Secretary, has said it’s not “reasonable or affordable” for nurses, who have just voted to strike, to get an inflation-linked pay rise. Apparently it is reasonable and affordable to demand that those nurses pay through their taxes to protect pensioners from inflation.

That’s before we even look at the wealth disparity between age cohorts as detailed by the ONS. People over 65 own over a third of the total wealth in this country; they are the second wealthiest age cohort with on average more than four times the wealth of people under 34; and one in four pensioner couples are millionaires. These are averages – they don’t apply to all pensioners – but the state pension is a universal benefit. Instead of targeting support and topping up the incomes of those who need it, the owners of multi-million pound homes who have final salary private pensions are subsidised by the people who clean their houses and deliver their Ocado orders.

All of this needs to be part of the way we talk about the triple lock. The inevitable defence that keeping it was 2019 Conservative manifesto pledge is far less convincing when you consider what has happened since then. The vast amounts of public spending required to address the Covid pandemic and resulting lockdowns weren’t in the manifesto, and nor was the £70bn energy price guarantee to mitigate the impact of the war in Ukraine. The country has changed, and holding one area of public spending sacrosanct while the scythe of austerity is taken to the rest is neither economically sensible nor morally just.

Suank is a chancellor turned Prime Minister, a spreadsheet nerd who by all accounts knows these figures inside out. He will be aware of just how unfair and distorting the system is. He must realise that there is no justification for keeping the triple lock as a universal benefit. We know the Prime Minister is thinking about pensioners right now – the question is whether he’s brave enough to think about anyone else.

[See also: Is Dominic Raab in danger?]