Ros Altmann: Removing the triple lock earnings protection will undoubtedly increase hardship
Former Pensions Minister Baroness Altmann led a House of Lords revolt against the Government’s one-year suspension of the triple lock.
But MPs voted to overturn a rebel amendment and stick with a state pension hike of 3.1 per cent, just days before inflation rose to 4.2 per cent.
The latest inflation numbers confirm again the cost of living crisis already engulfing pensioners.
The shameful decision to increase their state pensions by just 3.1 per cent next year will plunge more elderly people into poverty.
The House of Lords gave the Government and MPs the chance to think again on the triple lock and they refused to accept our compromise proposals, which would have helped correct for the anomalies of the Covid-19 impact on earnings and inflation statistics.
The latest 4.2 per cent CPI inflation rise for October was driven largely by rising household bills, such as electricity, gas and other fuel, after the energy price cap was increased last month.
This shows how inadequate the 3.1 per cent rise in state pensions next year will be.
With rising energy costs, I fear many of the poorest will be even less able to afford to heat their homes adequately over the winter.
To take away their much-needed and promised protection, knowing inflation pressures are rising, seems unjustifiable, especially when money was found for reducing bank, alcohol and other taxes.
The Government’s reasons to drop earnings protection for state pensions – and pension credit too – do not stand up to scrutiny Here are 10 excuses it has given and why they are wrong.
1. This is only for one year
For the elderly pensioners in their 90s who are the very poorest, cutting their pension benefits in real terms for one year could be for the rest of their natural lives.
What are they supposed to live on as their bills for heating, food and other basic essentials are already rising sharply?
How much will the state pension rise next April?
Under the triple lock, the state pension is meant to increase every year by the highest of price inflation, average earnings growth or 2.5 per cent.
But the Government removed the earnings element this year, so the basic state pension will now rise by 3.1 per cent or £4.25 to £141.85 per week, or around £7,370 a year.
The full flat rate will rise by £5.55 to £185.15 per week, or around £9,630 a year.
If a 4.2 per cent rise was applied, the basic rate would rise to £143.40 a week or £7,460, and the flat rate to £187.15 or £9,730.
How will the lower increase in the stage pension from April affect your finances and standard of living?
Write to This is Money and tell us your story at [email protected]. Please put TRIPLE LOCK in the subject line. We may publish some responses, but only anonymously.
2. The 8.3 per cent earnings rise in September was distorted by the pandemic and artificially high, so it shouldn’t be used
It is true that the 8.3 per cent growth in wages is impacted by the pandemic, but the House of Lords’ triple lock compromise allowed for this figure to be adjusted to remove the effects of the Covid measures last year.
3. The DWP says it cannot come up with a ‘robust’ alternative figure
This strains credulity beyond the limit of reason.
With so many statistical experts employed in the Department for Work and Pensions and Treasury, and with alternative figures having been put forward by Office for National Statistics and Office for Budget Responsibility, all the Government would need to do would be to choose a figure that can be justified as ‘rational’.
A Judicial Review would need to assert that the adjusted figure is irrational. The DWP is saying it cannot produce a number that would be universally agreed. That is not needed, should the Government really wish to protect pensioners as promised.
4. State pensions were increased by 2.5 per cent last year, when earnings fell by 1 per cent, so increasing by earnings this year would be unreasonable
This argument itself is disingenuous. Because pensions were increased by the promise made in 2019, pensioners should not be ‘punished’ by having their protection removed for one year now.
The truth is very different. Indeed, if the DWP had just stuck to an earnings link in both years, the state pension would be higher next year than is currently planned.
5. Pensioners have benefited from the triple lock overall
This is not true in relation to the current decision. In fact, using the earnings uprating would give an average 3.55 per cent over two years, while Government proposes just a 2.8 per cent two year average.
The planned change in state pension over the two years (a 1 per cent fall followed by 8.3 per cent rise) averages out to a rise of 3.55 per cent a year, while using 2.5 per cent last year and just 3.1 per cent next year, is an average of only 2.8 per cent over the two years.
Pensioners are clearly being short-changed in the middle of a cost of living crisis
Pensioners are clearly being short-changed in the middle of a cost of living crisis, with inflation already at 4.2 per cent and possibly set to rise to well over 5 per cent.
6. The Government is ensuring UK pensioners are still being protected
This is not true, especially as inflation is taking off and the UK state pension is the lowest in the developed world.
Pensioners in this country are being impoverished further. Only those pensioners who have other income will actually have a chance of being protected. Those depending on the state are being left poorer.
7. The Chancellor says the 8.3 per cent will cost over £5billion and is unaffordable
This argument is not tenable because the Budget announced tax cuts for alcohol, bank levies, fuel duty and internal flights, among many other things.
This is therefore a choice being made, to take money away from state pensions in order to help fund tax cuts elsewhere.
8. The Government is looking after the poorest pensioners with a range of benefits
For those in later life, future intentions do not pay their bills. This change will increase the number of pensioners in poverty in this country.
There are already two million pensioners living below the poverty line, and a million in extreme fuel poverty. This decision will worsen those numbers further.
Far from protecting pensioners, this measure will force more into hardship at the end of their lives.
Triple lock promise: The state pension is meant to increase every year by the highest of price inflation, average earnings growth or 2.5 per cent
9. It is not right to make younger generations pay for higher pensions for older people
As well as being a disingenuous argument, and dangerously worsening inter-generational tensions, this argument undermines the entire social contract on which our National Insurance system has been based since the 1940s.
Workers pay contributions during their life for an old age insurance that will provide them with a basic pension in retirement.
That is not funded, so it is inevitable that those in work will support those in retirement (or unemployed or disabled and so on).
To argue that older people can’t expect to be supported adequately is suggesting our National Insurance system is a sham. An unfunded system inevitably requires today’s workers and employers to pay for current pensioners.
10. The Government is already spending well over £100billion so pensioners should not expect more than is being offered
This argument is the most worrying. With an aging population, rising numbers of pensioners are going to cost far more in future and that should always have been planned for.
Pensioners seem an easy target to raid, but this is undermining the entire fabric of our national contract.
Make no mistake, this is a real terms cut in the UK state pension – which is the lowest in the developed world. Can one of the world’s richest countries really justify cutting state pensions, as inflation takes off?
Removing the triple lock earnings protection will undoubtedly increase hardship. The Government and MPs had a chance to think again, but they chose not to. Pensioners deserve much better.
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