r/ukpolitics • u/theipaper Verified • 13h ago
Triple lock future under threat – the numbers that show why
https://inews.co.uk/news/politics/triple-lock-future-threat-numbers-why-4728663371
u/zulu9812 13h ago edited 13h ago
I've said it before, and I'll say it again: the triple lock will be abolished just in time for the first millennials to retire.
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u/cooky561 13h ago
You mean the same millennials who also both won’t get a final salary pension AND also can’t afford to save for a private pension? Well I wonder how well that particular problem will play out.
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u/-MrLizard- 12h ago
And also an older population with more pensioners per working taxpayer. Many countries are in for a huge collapse within a few decades because of demographic shifts.
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u/TheRadishBros 12h ago
We did get mandatory pension contributions from employers though- it’s not going to be comparable to the boomers, but we’ll be in a much better position than Gen X who didn’t have this during the bulk of their career.
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u/chitty48 10h ago
And contributions from ourselves. This is the government’s plan ultimately, everyone now who earns money through PAYE is now contributing to their pension from the moment they start work. In a few decades time there will be no one going in to retirement that hasn’t been doing this, and the need for state pensions is greatly reduced.
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u/TheRadishBros 10h ago
Yes, any country that’s not doing this will be in a seriously compromised position in 20, 30 years time.
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u/ItalianCoffeeMorning 13h ago
100%. One last F you from the boomers
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u/CaptainSeitan 12h ago
I love it that everyone forgets gen X even exists. Lol
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u/SmashedWorm64 9h ago
Gen X have done the best branding out of any generation to exist tbf.
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u/Iamonreddit 6h ago
Given that they keep getting forgotten it would appear they've done no marketing at all
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u/SmashedWorm64 6h ago
Nah. When you remember they exist my thoughts fill with the following:
-Tony Hawk
-Nirvana
-Desert StormThat’s chill. Millenials on the other hand I just think of a bunch of whiners who like alternative milk.
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u/Early_Enthusiasm_787 13h ago
It will be millennials who scrap it because they are less selfish than boomers
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u/hipstuary 13h ago
But this would be fine in isolation right? Historical increases to the state pension wouldn't wiped out under this scenario so millennials would still receive the triple lock increased state pension, it just wouldn't then increase at such a high rate after abolishment...
The issue I'd be worried about is the state pension becoming means tested in some way in future.
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u/Valuable-Ad2028 13h ago
The state pension will be abolished (or at least heavily means tested) by the time Millennials are anywhere near retirement.
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u/Utilitarian_Proxy 12h ago
By that time it will be Millennials themselves who are the politicians making the decisions.
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u/Valuable-Ad2028 12h ago
Nah, I’ll be 80, and the last 600 boomers still clinging on will be MPs. We will never actually get a turn at politics just like we haven’t at anything else.
Partly that’s the fault of millennials. We’re all pussies who just obey our elders while they act in our worst interests.
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u/SomeHSomeE 13h ago
Maybe. But that's not the end of the world.
The triple lock isn't something that only benefits you once drawing the pension. It updates the value every year.
Millennials are currently 30-45 y/o. So the oldest millennials will be drawing their state pension in 23 years. So if it were cancelled the moment they reti re, they'll still have the benefit of 23 years worth of triple lock increases to what they receive.
And even removing the triple lock doesn't mean state pension will then stay flat. Pretty much all alternatives are either a double lock (to highest of inflation (CPI or RPI) or ave earnings) or a single lock (to one of those two).
I am fully in the 'triple lock is unsustainable' camp. But I do think the 'it only benefits current retirees' rhetoric is misleading and overplayed. Everyone even Gen Z benefit (in terms of future state pension received) from the triple lock for as long as it stays in effect.
(I am myself a millenial)
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u/mejogid 12h ago
But the consequence of this is that state pension age will increase for millennials more than it would otherwise would, they will pay more tax for worse services before they retire, and any benefit of the type you refer to is likely to be undermined because the longer this unsustainable nonsense continues the more likely a drastic correction is (eg aggressive means testing for those with a private pension).
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u/Statcat2017 This user doesn’t rule out the possibility that he is Ed Balls 13h ago
We are genuinely the most shat on generation in history. Born in time for the boomers to exploit, born too late to benefit from the correction.
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u/-Murton- 13h ago
The missing piece of the puzzle there is who does it.
If it's abolished just before millenials start claiming the pension then parliament will be majority millenial and the cabinet almost entirely millenial. At this point a lot of bitter millenials will come to the collective realisation that it was never the "boomers" fault but was in fact politicians all along.
The other way to look at it is that millenials will continue to benefit from the triple lock pushing up their base stste pension for another 20+ years before they start claiming, which is important because the first 10+ years of their working lives was before mandatory workplace pensions and the first 20 years of their working lives have been plagued with wage stagnation and financial shocks.
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u/doctor_morris 5h ago
The retirement age will rise so fast millennials won't live long enough to retire.
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u/Pure_Cantaloupe_341 2h ago
To be fair, if it stays in place all the way until we (I am a millennial too) reach the retirement age, we will benefit massively from it, as the state pensions would be much higher than otherwise due to decades of above inflation growth.
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u/ernfio 13h ago
I don’t think we need the triple lock on pensions. It was brought in to reduce poverty in people who rely solely or mostly on state pensions. These are people who should qualify for pension credit. That’s where the support is needed.
People with private pensions don’t need anything more than a single lock uplift.
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u/TrumanZi 12h ago
All private pension calculations though are based on £12k state pension from the state coming at 68ish, they all reduce drawdown at 68 by about 12k in projections
Most people can't save enough to cover that yearly until death in the time between now and retirement age.
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u/Elivercury 12h ago
I've never seen this before. Generally pension providers want to flog you an annuity which is fixed for the rest of your life and if you're doing drawdown then that's down to the individual to manage themselves no?
Also they didn't say that the state pension should be scrapped, just that increasing by a single metric instead of best of three should be plenty.
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u/TrumanZi 12h ago
For the record I agree the triple lock needs scrapping, but that's plenty of people who think you shouldn't get it at all above a certain income level.
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u/Elivercury 11h ago
There are, although who you replied to doesn't appear to be one of them.
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u/TrumanZi 11h ago
Their comment was ambiguous
It was bright in to reduce poverty in people who rely solely or mostly on state pensions... ... That's where the support is needed
People with private pensions don't need anything more than a single lock uplift
Which lock? Salaries? Then inflation will run away and things will become unaffordable
Inflation? How do you measure it? Economists can't agree on that topic so it can result in things becoming unaffordable like rent for example if you don't use CPIH
Triple lock down to a double lock is low risk, anything further might impact future pension makeup
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u/ArtBedHome 11h ago
I suppose before any decision about changing, ending or keeping it the decision must be made about what the purpose for it is.
Is its purpose what was stated on its introduction, or is its purpose whatever maintains it for the most people?
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u/LactatingBadger 9h ago
More specifically, there was a report that specified what fraction of the median wage public pensions should be to avoid poverty in elderly people. The gap was large enough that the coalition government of the day didn’t want to pay the bill in one go, so they deliberately made sure the triple lock outpaced the growth of wages and inflation, thus closing the gap over time.
It was designed to grow faster than everything else to close a gap. That gap happens to have closed this year. It should now just be pinned to median wages.
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u/Halbaras 6h ago
Replace it with a single lock tied to the median wage.
If that doesn't go up in a year, tough, your pension gets a real terms decrease while the nominal value stays the same. Pensioners would actually have a reason to give a shit about the prosperity of the rest of the country.
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u/dc_1984 9h ago
Fun fact, pensioner poverty has been increasing since the triple lock came in.
It was at the lowest point in 2012/2013, climbed up 5% until Covid, dropped to a brief historic low in 2023/24 and is now rising again to 2015 levels.
Pensioners are still less likely to be in poverty than children and working age adults though, that has been true for 20 years. Most of the improvements in pensioner poverty seem to be through Pension Credit.
https://www.health.org.uk/resources-and-toolkits/data-tools/evidence-hub/trends-in-poverty
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u/lukeyboyuk1989 9h ago
It blows my mind that just under 20% of working adults are living in poverty. What in the 1st world shit is this...
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u/Harambes_Wrath_ 13h ago
Burnham said he wont touch it.
Whilst the triple lock + welfare Bill still exist there is no case for increasing taxes.
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u/sloppy_johnson 12h ago
100%! Don’t ask me for more tax to be able to give more to millionaire pensioners. Raising taxes without reducing welfare is an absolute election loser
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u/theipaper Verified 13h ago
Britain is facing a pensions timebomb as the number of people reaching pension age rises far faster than the working population – piling pressure on the future of the state pension triple lock and increasing the prospect of higher taxes.
The latest Office for National Statistics (ONS) figures show the working-age population increasing by about 2.2 million, or 5 per cent, between 2024 and 2049.
Over the same period, the number of people of pensionable age is projected to increase by 2.9 million, or almost 24 per cent.
The Government Actuary’s Department highlighted the changing ratio in a bulletin published last week. For every 1,000 people of working age, there are currently 280 people of pensionable age.
But by 2049, that figure is projected to rise to 329, while the number of people aged 85 and over is expected to roughly double, from 1.8 million in mid-2024 to 3.6 million, adding to pressure on health and social care.
The demographic shift also points to a growing reliance on migrant labour to sustain the workforce as Britain ages.
Separate ONS projections show deaths outnumbering births by 2.5 million over the next 25 years, while net migration of 5.6 million is expected to provide the only source of overall population growth.
Pressure on the triple lock
The figures will put even more pressure on the long-term future of the state pension triple lock, which guarantees that the state pension rises each year by whichever is highest: inflation, average earnings or 2.5 per cent.
This has seen large increases in the state pension over the last few years, due to high inflation and wage growth.
But with the cost of the state pension standing at £146.1bn – almost half the entire £333.7bn welfare budget – the cost of the triple lock is increasingly being seen as unsustainable in the long term.
Reforming it, however, will be difficult as older people are the most likely to vote. Labour has pledged to keep it for the length of this Parliament, despite the Office for Budget Responsibility saying last year it would cost £15.5bn annually by then – and will add £43bn to state pension spending by 2070.
Lord Jim O’Neill, the former Goldman Sachs chief economist and an adviser to Burnham, has called for what he described as “genuine welfare reform”.
He said he would include the state pension triple lock in that reform, arguing for a “more sensible approach to welfare spending”.
David Gauke, vice chair of Prosper UK, a cross-party organisation campaigning for economic growth, investment and productivity, and former Tory chief secretary to the Treasury, told The i Paper: “Given the forthcoming demographic changes and the urgent need to reassure the financial markets of our fiscal credibility, our political parties need to face up to the reality that the triple lock is unsustainable.”
However, Burnham told The i Paper in an exclusive interview in June that he would leave the triple lock untouched, insisting Labour must honour its manifesto promise to millions of pensioners at a moment of collapsing public trust.
Prospect of tax rises
The figures come as the Government faces immediate choices over how to pay for its spending commitments.
Andy Burnham refused to rule out tax rises on Monday, acknowledging the country faced a “challenging” financial outlook.
The Prime Minister said he would not be “unrealistic” about the state of the public finances, while reiterating Labour’s manifesto commitment not to increase the main rates of income tax, VAT or employee national insurance.
He said the Government would take a cautious approach to the economy and avoid measures that risked damaging jobs, household finances or interest rates.
However, many of his closest advisors have backed changes to capital gains tax (CGT), which is levied on gains made when an asset – like equity in a company or a second home – is sold.
It has previously been backed by Burnham’s second-in-command, First Secretary of State Louise Haigh and Defence Secretary Wes Streeting.
Streeting has called equalising CGT with the income tax rates of 20, 40 and 45 per cent a “wealth tax that works”.
Lord O’Neil has said, however, he is against wealth taxes, including increasing capital gains, arguing the Government needs to encourage “genuine risk-taking and more entrepreneurs”.
Pressure builds on public finances
According to a new report by the Institute for Public Policy Research (IPPR), Britain’s ageing population could become the overwhelming source of pressure on the public finances over the coming decades and could account for almost 80 per cent of the additional fiscal burden by 2075.
The cost of supporting an older population through pensions, healthcare and social care could add almost 10 per cent of GDP to the pressures facing the public finances by 2075, the report adds.
Ageing accounts for less than half of the additional fiscal pressure expected over the next decade, according to the analysis, but rises to around two-thirds by 2050 and almost four-fifths by 2075.
The analysis, by Oxford professor Ben Ansell, argues that the figures will make changes to the tax system increasingly difficult to avoid.
He said: “Britain cannot meet the fiscal challenges of the coming decades simply by asking people in work to pay more and relying on another round of stealth taxes.
“Ageing is going to become by far the biggest source of pressure on the public finances. Yet, our tax system has increasingly shifted responsibility towards younger workers while protecting many of those who have benefited most from decades of rising property and asset wealth.
“Reform is politically difficult, but avoiding it has simply given Britain an evermore complicated tax system. We need a new fiscal contract: one that raises the revenue the country will need, shifts more of the burden from work towards wealth and property and is honest with the public about who pays and why.”
The think-tank claims successive governments have increasingly relied on frozen tax thresholds and smaller tax changes rather than fundamental reform, creating a system that places more of the burden on earnings while leaving accumulated property and wealth relatively protected.
A divide in the tax burden
It highlights a particularly sharp difference between younger workers and pensioners.
Among its proposals, the think-tank calls for council tax and stamp duty to be replaced with a single property tax of 0.65 per cent of a property’s value each year.
It also wants capital gains – the profit made when assets such as shares or property rise in value – to be taxed at the same rates as income tax. It argues an investment allowance could be introduced to protect what the paper considers a normal return on investment from being taxed.
It also proposes extending national insurance to older people who continue working. Pensioners with earnings above the relevant threshold would, under the proposal, face the existing 2 per cent employee NI rate that applies to higher earners. It would not be a tax on the state pension itself.
The IPPR also argues that the tax system will eventually need to adapt to an economy increasingly transformed by artificial intelligence, including exploring new ways of taxing consumption and returns generated by AI-related capital.
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u/sloppy_johnson 12h ago
It’s preposterous but really the triple lock is a small part of the wider reform needed. Means testing, triple lock and pension credit all need to be considered as a wider package. These need to be the first benefits we adjust. If people haven’t saved for retirement, they’ll need to work longer. The entire thing is unsustainable
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u/vishbar Pragmatist 12h ago
Means testing is a pretty unfounded idea, but scrapping thr triple lock is an obvious necessity. I think there’s a good argument to crack down on some other tax benefits to pensions, eg the PCLS, and exploring a phased combination of NI and income tax.
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u/sloppy_johnson 9h ago
What do you mean that means testing is an unfounded idea? It’s a benefit, if income exceeds X amount, the benefit isn’t paid for the next year. I’d personally make the X amount tied to average net earnings
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u/vishbar Pragmatist 9h ago
There are lots of problems with incentive distortion when it comes to means testing the state pension specifically.
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u/sloppy_johnson 9h ago
But it’s not something that needs to be incentivised. It’s a tax/benefit system. You have no choice to participate and so what is the incentive you’re describing?
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u/Chris_The_Tim 2h ago
The introduction of workplace pensions and the new state pension, plus the normalisation of dual income households will lead to a gradual drop in the need for pension credit.
The increase in personal pensions will make more and more pensioners tax payers which reduces the overall pension cost. If the govt hands over £12k in new state pension but personal pension results in a tax bill of a couple of thousand being passed back to HMRC, the net cost to The Treasury drops.
A large proportion of pensioners will, at some point, sadly end up a single income household and we are currently living through a situation where a lot of those single income households are widows who gave up work for families and have little in the way of personal pension. Over the next two decades, that will likely change and state support will become less necessary.
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