Triple Lock Becomes Double Lock For 1 Year

Secret2ndAccount

MX5huggy said:
I’m not concerned I wanted a mathematical answer, if the increase is 3% instead of 8% this year with compounding how much less will the pension be in 2050?

ESBanker said:
It's a fairly straightforward (albeit arbitrary) calculation, as long as you have all of the inflation statistics for the next 29 years....

Actually, it's simpler than that. Answer is 4.6% less. So, in today's money, £8.31 / wk
The numerical value (the number of £) will go up year by year, but so will prices. The numerical value could get ahead of prices slightly depending which part of the triple lock gets used, but however many different numbers you multiply it by, the final amount will always remain 4.6% lower.

Here's an alternative way to look at it.
You wanted a pension that would buy you 108 loaves of bread. You are now stuck with a pension that will only buy you 103 loaves of bread.
If inflation runs at 2% for the next 29 years, and the triple lock runs at 2.5%, your pension at the end will buy you 118 loaves of bread (gets back to 108 loaves after 10 yrs). Only if inflation is high, and runs ahead of pay increases, will your pension fail to catch, and pass the 108 loaves you were looking for.

jamesd

Deleted_User said:

Setting the wonderful 1970s as the golden standard is smart. Britain was doing so well, who wouldn’t want to try that again? 

"the truth is that most ordinary families in 1970s Britain were better off than ever"

That's in spite of organised labour driving Labour out of government and getting us Thatcher and more riots, including a few hundred meters from where I was living in London at the time.

Nice try at distraction.

Deleted_User said:

Making people think that more and more oldies would be able to live swimmingly on the backs of fewer and fewer working age taxpayers is unhelpful.  It deceives them and translates into relying less on yourself.  The objective for the state should be to provide a safety net, and safety net grows with inflation. 

It's entirely fine for you to have that view but it's not the one that surveys of minimum spending show, with those showing an expectation that the ability to spend on benefits of all kinds should have a link to increases in wages so that those on benefits don't gradually fall behind. No budget for mobile phones and internet in 2000 living standard expectations but today they are normally taken to be necessities even though that means more cost. Go back further and you'll find the lack of inside toilets, washing machines, TV sets, central heating and microwave ovens that require more spending and are now simply expected.

jamesd

MX5huggy said:

I’m not concerned I wanted a mathematical answer, if the increase is 3% instead of 8% this year with compounding how much less will the pension be in 2050? 

4.6% as Secret2ndAccount wrote. Not hard: 1 - 103/108 all times 100 = 4.6 . Compounding makes no difference to the percentage.

However this ignores political reality and the potential for the state pension to come to be regarded as unaffordable or unjust and produce cuts. 8% would have fostered that view and wouldn't have been a good move medium or long term.

[Deleted User]

jamesd said:

Deleted_User said:

Setting the wonderful 1970s as the golden standard is smart. Britain was doing so well, who wouldn’t want to try that again? 

"the truth is that most ordinary families in 1970s Britain were better off than ever"

That's in spite of organised labour driving Labour out of government and getting us Thatcher and more riots, including a few hundred meters from where I was living in London at the time.

Nice try at distraction.

Yep. Stagflation (including 30% inflation) and lowering of the level of life is what we should aim at.  Bound to help retirees make ends meet.  If the Beeb says that The Sick Men of Europe had it best then it must be true.   

itwasntme001

Deleted_User said:

jamesd said:

Deleted_User said:

Setting the wonderful 1970s as the golden standard is smart. Britain was doing so well, who wouldn’t want to try that again? 

"the truth is that most ordinary families in 1970s Britain were better off than ever"

That's in spite of organised labour driving Labour out of government and getting us Thatcher and more riots, including a few hundred meters from where I was living in London at the time.

Nice try at distraction.

Yep. Stagflation (including 30% inflation) and lowering of the level of life is what we should aim at.  Bound to help retirees make ends meet.  If the Beeb says that The Sick Men of Europe had it best then it must be true.   

jamesd is correct.  Living standards were pretty good in the 1970s for ordinary, working class people.  You had 30% inflation for like a year or so.  But you miss the fact that incomes rose also - such that real incomes were growing for nearly all years in the 1970s (and quite a bit more than they have done for the last 20 years).

This was also at a time when housing was cheap (interest rates servicing was not a huge problem as wages rose in tandem), valuation on assets were low so working class had a good shot at generating passive wealth, you could get very generous employer benefits (GARs etc).  The working class had the power.

Currently, we have almost the opposite situation.  Labour / working and lower middle class are not doing so great, especially compared to the owners of capital (business owners, those who own stocks etc).

MaxiRobriguez

I despise the government, but they made the right decision on this one. The 8.8% increase anomaly will get reversed next year when lower income workers return to work, but pensioners would be protected from any reductions due to the other elements of the triple lock. In essence, a perpetual 8% payrise that no one else really got, just because of a technicality. 

The obvious problem here is the idea of a triple/double lock itself. The fairest thing to do would be to have the state pension at a reasonable level to allow people to actually live off it, and then apply inflation only from there on in. No need to faff about with average earnings or a set figure.

itwasntme001

I think a calculation based on just median wage growth should be used with no floor at all and no inflation.

So this year pensioners would get an 8% rise, but then next year it would fall back down again.

It is unfair to floor it as you could have a situation where wages and inflation fall (say with automation), whilst pensions still rise 2.5% when there is no need to at all.

It is also unfair to use the max of inflation and wages.  I believe pensioners should be equally suffering to the working class (like when inflation rises more than wages).

michaels

itwasntme001 said:

Deleted_User said:

jamesd said:

Deleted_User said:

Setting the wonderful 1970s as the golden standard is smart. Britain was doing so well, who wouldn’t want to try that again? 

"the truth is that most ordinary families in 1970s Britain were better off than ever"

That's in spite of organised labour driving Labour out of government and getting us Thatcher and more riots, including a few hundred meters from where I was living in London at the time.

Nice try at distraction.

Yep. Stagflation (including 30% inflation) and lowering of the level of life is what we should aim at.  Bound to help retirees make ends meet.  If the Beeb says that The Sick Men of Europe had it best then it must be true.   

jamesd is correct.  Living standards were pretty good in the 1970s for ordinary, working class people.  You had 30% inflation for like a year or so.  But you miss the fact that incomes rose also - such that real incomes were growing for nearly all years in the 1970s (and quite a bit more than they have done for the last 20 years).

This was also at a time when housing was cheap (interest rates servicing was not a huge problem as wages rose in tandem), valuation on assets were low so working class had a good shot at generating passive wealth, you could get very generous employer benefits (GARs etc).  The working class had the power.

Currently, we have almost the opposite situation.  Labour / working and lower middle class are not doing so great, especially compared to the owners of capital (business owners, those who own stocks etc).

Some workers are getting back power because of Brexit (corbyn could understand this even if new labour wilfully chose not to)

We are hearing howls of protest from the Labour supporting middle classes who see prices increasing for lattes and domestic cleaners whereas those working class dummies who voted for Brexit are seeing their wages increase - it is almost as if they are not as thick as the remainers tell each other in their Islington echo chambers.

jamesd

itwasntme001 said:

It is unfair to floor it as you could have a situation where wages and inflation fall (say with automation), whilst pensions still rise 2.5% when there is no need to at all.

It is also unfair to use the max of inflation and wages.  I believe pensioners should be equally suffering to the working class (like when inflation rises more than wages).

The triple lock isn't permanent. It's just trying to do some slow catching up to the level relative to wages that it was at before the Thatcher government changed it to inflation as a way to slowly cut it compared to wages.

MaxiRobriguez said:

The fairest thing to do would be to have the state pension at a reasonable level to allow people to actually live off it, and then apply inflation only from there on in. No need to faff about with average earnings or a set figure.

A problem with that is that it'll increase pensioner poverty because the poverty level is set at 60% of median wages and wages tend to rise at about inflation plus one percent.

The state pension had a wages link and that was switched to inflation to cut it during the Thatcher years. Long term, wages is what's needed so that we don't see a gradual decrease in pensioner living standards compared to those still working. And that's what surveys of what people receiving benefits should be allowed to have have resulted in people saying, with those on benefits also expected to be able to benefit from worker pay increases.

Still quite a way to go to get us back to 1970s levels vs median earnings. The 2016 change to the single tier pension has made that worse for workers with full working lives because it eliminated the earnings-related part which wasn't capped at 30 years worth. But autoenrollment should help them. And the higher single tier core level should help those with just or mostly credits.

Underlying this among other things is what we should provide for working age benefits, where low levels are more justifiable if it's regarded as (and really is) temporary and what we want for people who've retired and hopefully on enough to live without lots of money worries, since we'll all hopefully end up in their shoes one day. Lots of room for disagreement on what the best or right or fair or whatever else choices are for those things.

itwasntme001

michaels said:

itwasntme001 said:

Deleted_User said:

jamesd said:

Deleted_User said:

Setting the wonderful 1970s as the golden standard is smart. Britain was doing so well, who wouldn’t want to try that again? 

"the truth is that most ordinary families in 1970s Britain were better off than ever"

That's in spite of organised labour driving Labour out of government and getting us Thatcher and more riots, including a few hundred meters from where I was living in London at the time.

Nice try at distraction.

Yep. Stagflation (including 30% inflation) and lowering of the level of life is what we should aim at.  Bound to help retirees make ends meet.  If the Beeb says that The Sick Men of Europe had it best then it must be true.   

jamesd is correct.  Living standards were pretty good in the 1970s for ordinary, working class people.  You had 30% inflation for like a year or so.  But you miss the fact that incomes rose also - such that real incomes were growing for nearly all years in the 1970s (and quite a bit more than they have done for the last 20 years).

This was also at a time when housing was cheap (interest rates servicing was not a huge problem as wages rose in tandem), valuation on assets were low so working class had a good shot at generating passive wealth, you could get very generous employer benefits (GARs etc).  The working class had the power.

Currently, we have almost the opposite situation.  Labour / working and lower middle class are not doing so great, especially compared to the owners of capital (business owners, those who own stocks etc).

Some workers are getting back power because of Brexit (corbyn could understand this even if new labour wilfully chose not to)

We are hearing howls of protest from the Labour supporting middle classes who see prices increasing for lattes and domestic cleaners whereas those working class dummies who voted for Brexit are seeing their wages increase - it is almost as if they are not as thick as the remainers tell each other in their Islington echo chambers.

I am not entirely sure what your point is?  Yes there are signs of some of the working class getting back power, Brexit and even COVID being catalysts.  But is this so surprising after 3-4 decades of losing their bargaining power?

I wouldn't class working class as dummies.  They did what was right for them.  Middle class Londoners voted what was right for them but lost out.