Are pensioners about to be shafted – again?

bigadaj

Entitled millennials or entitled baby boomers, now there's a choice.....

Number75

You sound like you live in a bit of a bubble of people with Big Ideas and especially clever children.

I mentioned my stepdaughter working hard and supporting herself through uni. We live in an industrial northern ex mining town that regularly comes high on the list of bad educational results. She's not running a fancy import export clothes business. She's getting up at 4am to go to McD to clean fryers. It makes me angry that people like you want to write off a generation of being molly coddled and having no work ethic.

The vast majority of young people work hard - just as I did, and you did.

JezR

The triple lock has been irrelevant for pension rises in the last two years, as the rise made has been in line with the increase in general earnings, ie the minimum currently required by law.

The flat 2.5% rate was used for some years before that, but this has to be balanced against the reduced rise in other years from the change to CPI rather than RPI for the inflation measure.

xylophone

the change to CPI rather than RPI for the inflation measure.

Which was unfair - the government got away with it but those whose occupational pensions with GMP were "hard wired" to RPI have certainly lost out, as have those whose schemes weren't and so have been switched to CPI willy nilly.

Jackieboy

Sapphire wrote: »

I'm sure pensioners who you no doubt think are very wealthy and should subsist on the amount you suggest (which would give them little enjoyment and a miserable existence and terrible standards of care) after a lifetime of hard work would be delighted with your view. Young people living on JSA need only do so for a short period, and have every opportunity of removing themselves from their position. Retired people do not, though of course with your obvious dislike of older people, you'd not mind if they ended up in the gutter – or better still, in some Soylent Green scenario. Lovely. One can only hope the same thing happens to you one day.

What you say in your first paragraph may be true for the last decade or so, but no one dreamt that their pensions would be messed around with in future before that. People were given to understand that they would contribute a certain amount, then get an assured return for that. To go back on such promises would be truly despicable – fine to make adjustments for future higher rate tax-paying pensioners, but not for those already taking pensions, who would have no way of bettering their financial position.

But, as I posted earlier, no pensioner does actually have to live on that level of pension. In fact, if they have worked for 40 years, they'll get considerably more than that without even needing to claim pension credit - the SRP goes up to over £250pw for those who weren't contracted out during their working lives.

However, even my parents' generation, (born before and during the Great War) didn't expect to have anything other than a bare existence if they had to rely only on the state pension.

Linton

JezR wrote: »

The flat 2.5% rate was used for some years before that, but this has to be balanced against the reduced rise in other years from the change to CPI rather than RPI for the inflation measure.

xylophone wrote: »

Which was unfair - the government got away with it but those whose occupational pensions with GMP were "hard wired" to RPI have certainly lost out, as have those whose schemes weren't and so have been switched to CPI willy nilly.

The whole point of inflation indexing is to protect the real value of income. RPI has major problems that lead to it overestimating average price increases. CPI is much more accurate. So yes, people have suffered from the change in that they get a lower income than would have otherwise been the case. But they have still got what they signed up for, protection against inflation. So it's difficult to see this as an example of "shafting".

I have detailed personal expenditure data going back to 1999. In the period between then and now my expenditure on basics (food, insurance, utilities, running a car etc) has overall increased remarkably closely in line with CPI.

bowlhead99

xylophone wrote: »

the change to CPI rather than RPI for the inflation measure.

Which was unfair - the government got away with it but those whose occupational pensions with GMP were "hard wired" to RPI have certainly lost out, as have those whose schemes weren't and so have been switched to CPI willy nilly.

You could say it was unfair because the figures are typically lower, but use of CPI for state pensions is arguably a 'better' measure of inflation - certainly in technical terms (using formulae followed by the rest of the developed world for the last couple of decades, rather than the overly simplistic one we came up with when trying to protect workers from price rises after the first world war). The formula effect will usually cause RPI to run ahead of CPI and is a failure of the mathematical construction of RPI.

CPI is a little light on housing costs such as insurance and council tax but is not too bad for the average person of state pension age who does not have a mortgage etc and is not looking to upsize his house. Certainly for the lower income pensioner who gets subsidised housing, council tax and TV license.

JezR

I wasn't really commenting on the relative appropriateness of RPI/CPI/CPIH etc, but on the differences between the rises under the triple lock regime compared with the former RPI one and that they are less dramatic over the whole period of its operation than seems to be painted in general. This is largely a result of the long period of stagnant earnings in the earlier part of the decade.

bowlhead99

JezR wrote: »

I wasn't really commenting on the relative appropriateness of RPI/CPI/CPIH etc, but on the differences between the rises under the triple lock regime compared with the former RPI one and that they are less dramatic over the whole period of its operation than seems to be painted in general. This is largely a result of the long period of stagnant earnings in the earlier part of the decade.

It sounded like what you were saying was that triple lock hasn't helped pensioners in last couple of years as increases followed earnings, but they did benefit from it in earlier years because "...the flat 2.5% was used for several years before that".

Then it also sounded like you thought that there was an unwarranted/unfair decrease from use of CPI replacing RPI... I inferred this because in reference to the benefit of getting a flat 2.5% despite low inflation and earnings, you said, "this has to be balanced against against the reduced rise in other years from the change to CPI rather than RPI for the inflation measure".

The implication of your comment was that the change to CPI was wrong and detrimental to pensioners trying to maintain their real terms value, which is why you were seeking to 'balance' the clearly beneficial impact of boosting their real terms value with the 2.5% lock.

Whereas my contention (and presumably the government's) would be that on the one hand the 2.5% gave an advantage to pensioners, while on the other hand inflating by CPI did not give a disadvantage, as CPI was reasonably reflective of price changes and in any case is only used when giving the average wage increases would give a worse result.

Clearly CPI is not as nice for pensioners as RPI, because of RPI's flawed maths giving a higher result. But as the purpose is to increase spending power in line with cost increases it seems OK as a measure (arguments of CPI vs CPIH notwithstanding); All of Europe and US use the same sort of formulae (geometric mean rather than arithmetic mean during first level aggregation of price moves) in their modern equivalents.

antrobus

xylophone wrote: »

The late Margaret Thatcher began her pension reforms with the Social Security Act of 1980. This saw the correlation between average earnings and state pension increases severed, with the aim to reduce public spending.

Pensioners have only started "catching up" with what they would have received had the link not been severed.

The link between pensions and average earnings was only introduced in 1975. (The basic state pension wasn't even subject to regular uprating until 1973.)

The History of the State Pension.
https://www.ifs.org.uk/bns/bn105.pdf

So that 'double lock' was only in place for about five years. The current 'triple lock' came in April 2011 and will last until 2020, which is a bit longer.

xylophone wrote: »

...The full new state pension is still below what a basic state pension would have been had the earnings link not been severed?

It's not a freebie you know. You can pick any level of basic state pension you like, but somebody has to pay for it.