The demise of the triple lock.

jamesd

The problem is wage volatility. Say covid-19 causes a 10% wage drop. Inflation and 2.5% prevent pension from following them down. Next year wages return to where they were and  the wage part requires a corresponding 11% increase in the state pension even though it's largely a mathematical artefact of wage volatility. 

Wages aren't normally that volatile so it seems sensible to either suspend the wage part or  put in a floor so it doesn't have an effect until wages are higher than last year.

Triple lock was designed so that the inflation or 2.5% would slowly recover the loss in value since increases were changed to inflation early in the Thatcher years. No surprise that high wage volatility requires a tweak so it doesn't act faster than intended.

Thrugelmir

squirrelpie said:

Thrugelmir said:

Hard to argue with the lock remaining now that inflation is at such low levels.

Well the 2.5% part doesn't do anything at all unless inflation is low, so it's certainly hard to argue for that part of the lock if inflation is greater than 2.5%. So I think you have your logic reversed.

Inflation has the impact of eroding Government debt. A 2.5% compound increase progressively becomes more of a real cost to fund. 

Silvertabby

jamesd said:

The problem is wage volatility. Say covid-19 causes a 10% wage drop. Inflation and 2.5% prevent pension from following them down. Next year wages return to where they were and  the wage part requires a corresponding 11% increase in the state pension even though it's largely a mathematical artefact of wage volatility. 

Wages aren't normally that volatile so it seems sensible to either suspend the wage part or  put in a floor so it doesn't have an effect until wages are higher than last year.

Triple lock was designed so that the inflation or 2.5% would slowly recover the loss in value since increases were changed to inflation early in the Thatcher years. No surprise that high wage volatility requires a tweak so it doesn't act faster than intended.

Perhaps one way round that would be to adjust salary inflation to what it could have been without the Covid factor.  Or assume 2.5% as a quick and easy option.

We (Mr S in receipt of his State pension, me a few months to go) wouldn't have a problem with that.

phillw

sparky0138 said:

What do you think we should have instead?

I'd have thought it would have been better to base it on government income, pensioners have been safe to elect a government that will cut taxation for the rich while guaranteeing their pension will keep it's value.
Now that the conservatives have such a huge majority, then can stop relying on the grey vote and find cheaper votes to buy.
Maybe pension values should be kept in sync with benefits. I wonder how long conservatives would have stayed in power if state pensions had been cut at the same rate.

ian1246

From a moral point of view: when 100,000s of working age individuals are loosing their jobs or seeing a significant drop in their earning potential/quality of life due to Covid19, it seems wrong to then expect them to pay increased tax's, or experience reduced services if Tax's aren't increased to reflect the increased government debt - whilst Pensioners then experience an increased quality of life due to increased state pension.

I.e. i m in the public sector, with 2 pay rises left to go until i m at full pay- there are rumblings of a pay freeze. Such a pay freeze for 2 years would mean i'd loose out on £20,000 in earnings & my own subsequent pension be massively effected, alongside my current quality of life hugely effected/made poorer by such a decision.

I would be beyond angry in such circumstances if the Triple Lock remained intact or pensioners also dont share the burden - especially since the current state of the economy & government debt are almost entirely a legacy of THEIR policies & voter-preferences, which my generation (30)have had very little say over (not even going to mention Brexit....), yet will have to live (& work) with.

All ages must shoulder the burden of the Covid19 crisis - not just the working age....

MaxiRobriguez

Wealth is now more concentrated in the older generations than it has been in forever. The triple lock has long since succeeded in it's aims of eradicating pensioner poverty and gone on to supplement already wealthy people who have hoarded the majority of financial assets.

Not everyone pensioner is rich of course, but for the purposes of national policy, it's time for it to go - linked to inflation and wage rises only is fine, and fair.

And if pensioners don't like it, eat one of the numerous "but in my day" or "if only you spent less on avocado toast" that has been aimed at everyone younger than half a century for the past decade.

jimpwarsop

MEM62 said:

jimpwarsop said:

Rishi Sunak will have to end the triple lock IMHO, 

That would be an incredibly brave decision.  The older generation vote in larger numbers!

jimpwarsop said:

To be fair I never agreed with the triple lock.

You view on that may change when you have reached retirement  :-) 
  

Governments should do the  right thing, I'm heartily sick of them pandering to this that or the other bunch of shouty folk.

As for me I hit State retirement age in early 2022 so in a way I'm a turkey voting for Christmas.

Linton

The triple lock was right at the time since many pensioners were solely living on the state pension which was steadily falling behind wages.  Every winter there were headlines in the papers about pensioners unable to afford to have their heating on.  Many pensioners still are living on SP with no other pension. Under these circumstances I think that about £9K/year is too low as a basic income - after all Minimum Wage is around £18K/year and that is hardly seen as living in luxury.

But yes, the costs should be spread more evenly both between workers and wealthy pensioners and between those who live on earnings and those who live on investments.  So my solution is to reduce NI significantly and raise the lost money from increases in income tax and capital gains tax which are paid by a greater number of people.  In that way we will be closer to all parts of the population paying their fair share.

Thrugelmir

MaxiRobriguez said:

Wealth is now more concentrated in the older generations than it has been in forever.

Hardly surprising when many have worked for 5 decades. 

Linton

And the % of the population over 65 has increased from 14% to 19% in the past 45 years.
And in the 1960s most people started work at 16 with perhaps 7% going into higher education.