The Triple Lock Pension Guarantee was introduced by the then Coalition Government in 2011. It guarantees that the basic state pension will rise in line with average earnings growth, inflation or 2.5% (whichever is highest).
At the time, the Triple Lock was introduced to ensure pensioners’ household incomes increased, regardless of their economic circumstances. However, according to the Institute of Fiscal Studies, the value of state pensions has increased by over 20% between April 2010-April 2016, compared with a growth in earnings of only around 8% and a growth in prices of 12% over the same period.
As the massive economic impact of the Coronavirus pandemic is becoming clear, there have been calls for a rethink on the Triple Lock guarantee, particularly from the Social Market Foundation (SMF).
The SMF’s argument is that as society has rightly made significant sacrifices to protect the elderly during the pandemic, the economic fallout from the pandemic should be shouldered across generations. In particular, any future austerity measures should not favour pension spending over welfare for the working age population.
One suggestion is that the Triple Lock guarantee is replaced by a Double Lock that removes the 2.5% promise. If this were to be done, the SMF estimates that savings of £20 billion over five years could be achieved.
No doubt the economic fallout from Coronavirus and how we tackle it as a country will continue to energise us all – politicians, economists and the ordinary person on the street.
Whether or not you agree with the SMF’s analysis, it’s always wise to keep your retirement plans – and how you will fund them – in the forefront of your mind. Please do contact your Brunsdon Financial Adviser for help, support and advice.
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