A retirement expert has sounded the alarm over potential changes to the triple lock policy, warning it could have a severe impact on pensioners. As Government spending on state pensions soars, several experts are hinting that Labour might have to abandon its commitment to uphold the triple lock for the duration of this Parliament.
The triple lock mechanism guarantees that state pension payments increase every April by the highest of either average wage growth, inflation, or 2.5 per cent. Thanks to this policy, state pensioners enjoyed a 4.1 per cent boost in their payments this April, with the full new state pension jumping from £221.20 per week to £230.25.
Pensions Secretary Liz Kendall, speaking to the revived Pensions Commission, was open about the challenges faced. She said: “Unless we act, tomorrow’s pensioners will be poorer than today’s, because people who are saving aren’t saving enough for their retirement.” This comes as the DWP revealed that 45 per cent of working aged adults in the UK are not paying into their pension.
Lily Megson-Harvey, policy director at My Pension Expert, said: “The triple lock is clearly an expensive policy and has been a challenge for successive Governments. However, the Labour Government must be cautious in how this is tackled as major changes will be difficult to implement without negatively impacting retirees.”
Alternatives to the triple lock being suggested include tying increases to earnings or averaging out rises over several years.
Some suggest the Government could look into tweaking tax relief across various sectors to secure funds for state pension costs. Nonetheless, Ms Megson-Harvey argues that the Government should adopt a long-term perspective when it comes to the state pension, reports the Express.
She declared: “This Government needs to work closely with the industry on a sustainable solution that protects the most vulnerable in society. It’s easy to fixate on the political football of the triple lock – we also need to consider wider policies that will support pensioners and savers. We want to see the Government focusing on long-term change rather than tinkering with policies and adding further layers of complexity within the pensions system.”
When examining other options for pension reform, the specialist recommended that boosting the auto-enrolment minimum contributions would represent a “sensible step.”
Currently, workers must be signed up to a workplace pension scheme and contribute no less than 8 per cent of their salary to the pot. This typically breaks down to a 5 per cent payment from the worker and 3 per cent from the employer, though these figures can differ.
Ms Megson-Harvey also highlighted concerns about a “widening pension engagement gap” that demands immediate focus, given that countless people display minimal concern for their retirement pots.
She cautioned: “Access to financial education and advice is an overlooked issue, with only one in ten consumers currently seeking pension advice. We need to see a step change from the Government in how it helps people understand and engage with their pension options so their money works harder for them in retirement. This includes publishing the long-delayed pension dashboards as soon as possible.”
The forthcoming pensions dashboard will combine all your private pensions and state pension entitlements in one single location.
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