Should the triple lock be scrapped in the 6 March Budget?

donnac2558

No it should be kept

I have only started receiving my SP this month, I get a small civil service pension which is under £70 per month. Due to ill health, I was unable to work for quite a long time since 2007 in fact.  The truth is, I actually am getting less on my SP and the civil service than I was getting on ESA.  I do mean ££s not just a few pounds.

BlackKnightMonty

Yes it should be scrapped

Exodi said:

https://www.moneysavingexpert.com/poll/2023/mse-annual-census-2023/
Nearly 60% of this forum is in their late 50's or older. 

You didn't need to do this poll, the results were obvious. It's the whole reason we enjoy the inherently unsustainable triple lock in the first place- because the same demographic also turn up to vote and the reality is, people vote for things that benefit them.

The triple lock is a vote winner, it is nothing about equality or economics. It's about keeping thee older people on side. Outside of virtue signalling, no-one close to retirement/retiring actually cares about the ever-increasing burden on taxpayers, because [insert something about having paid into the system] (despite usually being net beneficiaries of the tax system) or [insert something about working hard].

Just look at the last couple of years. Inflation surges in 2022-2023, pensioners enjoy a 10.1% increase on account of inflation. Workers wages then increase in response to that inflation in 2023-2024 and pensioners manage to scoop in again and enjoy a 8.5% increase this time on account of worker pay increases, an obvious double dip (and that's not even mentioning that this was calculating during the month many public sector workers received one off bonuses, meaning the earnings figure was higher than it should have been. But even the idea of removing the bonuses from the equation and increasing pensions by a meagre 7.8% would cause uproar among pensioners which politicians couldn't be bothered to deal with).

I think the icing on the cake is that most people not nearing retirement are painfully aware that the mickey mouse state pension increases can't last forever, so can look forward to an inevitable gutting of the state pension in the future, and/or it becoming means tested, and/or being told to work to 70, 80, who knows. All while being forced to increasingly subsidise pensioners in the mean time under the incredibly outdated guise that all pensioners are poor.

But I get that I'm not going to encourage turkeys to vote for Christmas, and clearly there are a lot of turkeys on this forum. Good on you guys I guess, I certainly wish I got a cumulative 19.5% increase over the past two years. but I think that is only the stuff of dreams for workers unfortunately.

Now, as usual, time for the heart-wrenching tales about destitute pensioners in response.

Of course I agree with everything you have said.

I thought it was topical and timely to float the question out.

booneruk

bownyboy said:

How anyone can say we should be reducing the pension is beyond me.

No one's talking about reducing the pension, the general theme is about modifying/scrapping the triple lock, the cost of which will more than likely balloon to something unsustainable if left alone. I'm sure most readers would want us to live in a country whose finances are on a sensible footing - whenever I see the long term GDP vs Debt projections I'm aghast. 

We're getting older as a nation, the % of out of work is increasing (long term sick etc). We have some big challenges ahead. I sincerely hope it doesn't happen, these forecasts go way off into the future, but 200%+ Debt vs GDP is awful

From page 22: https://obr.uk/docs/dlm_uploads/Fiscal_risks_and_sustainability_report_July_2023.pdf (obviously some may believe the OBR more than others!)

Linton

booneruk said:

bownyboy said:

How anyone can say we should be reducing the pension is beyond me.

No one's talking about reducing the pension, the general theme is about modifying/scrapping the triple lock, the cost of which will more than likely balloon to something unsustainable if left alone. I'm sure most readers would want us to live in a country whose finances are on a sensible footing - whenever I see the long term GDP vs Debt projections I'm aghast. 

We're getting older as a nation, the % of out of work is increasing (long term sick etc). We have some big challenges ahead. I sincerely hope it doesn't happen, these forecasts go way off into the future, but 200%+ Debt vs GDP is awful

From page 22: https://obr.uk/docs/dlm_uploads/Fiscal_risks_and_sustainability_report_July_2023.pdf (obviously some may believe the OBR more than others!)

1)  SP failure to  keep up with average wages  does represent a reduction in relative standard of living over time.  If SP is a major part of retirement income failure to keep up with with inflation will lead to real poverty.  So in my view a double lock  of inflation and average wages is essential.  The 2.5% minimum is a political fudge that cannot be justified in the long term.  However its effect in the short/medium term is relatively small since at least either inflation or earnings growth are normally above this value.

2) The way people talk about high debt levels is far too simplistic.  Globally every £ or $ of debt is owed to and therefore owned by someone else.  The total must be zero.  Regarding the UK, about 70% of our government's debt is owed to us.  For example a significant part of the debt is borrowed from insurance companies by selling them index linked bonds.  These borrowings are repaid to us with interest in the form of pensions and annuities.

Also of course the UK owns a significant amount of other countries' debt.  For example I see that the UK owns $693bn of  US bonds.  It is the 3rd largest foreign holder exceeded only by Japan and China.

booneruk

Linton said:
~

2) The way people talk about high debt levels is far too simplistic.  Globally every £ or $ of debt is owed to and therefore owned by someone else.  The total must be zero.  Regarding the UK, about 70% of our government's debt is owed to us.  For example a significant part of the debt is borrowed from insurance companies by selling them index linked bonds.  These borrowings are repaid to us with interest in the form of pensions and annuities.

I'm sure many here will recall the 'mini budget' fallout. If the markets feel like a nation is borrowing without sound financial planning then the costs of borrowing go up. Deficits go up. Say hello to a super-spiral with debt as a % of GDP following a very similar exponential curve to the chart in my previous post.

I'd rather that not happen! I'll be reaching retirement age in 20 years or so I'd love to see very generous state pension increases, but I just don't think it's sustainable.

The next election cycle will be interesting. I'm sure both parties would love to promise the earth, "We'll fix all your problems with investment", but they are ultra aware of the markets so I suspect restraint in manifestos.

hugheskevi

Linton said:

1)  SP failure to  keep up with average wages  does represent a reduction in relative standard of living over time.  If SP is a major part of retirement income failure to keep up with with inflation will lead to real poverty.  So in my view a double lock  of inflation and average wages is essential.  The 2.5% minimum is a political fudge that cannot be justified in the long term.  However its effect in the short/medium term is relatively small since at least either inflation or earnings growth are normally above this value.

If the 2.5% minimum cannot be justified in the long-term, how can a State Pension that constantly increases as a % of earnings over time be justified, as would happen under a double lock of CPI and earnings? When do you think changes would be made, given it is an inherently unsustainable uprating arrangement?

booneruk said:

I'm sure many here will recall the 'mini budget' fallout. If the markets feel like a nation is borrowing without sound financial planning then the costs of borrowing go up. Deficits go up. Say hello to a super-spiral with debt as a % of GDP following a very similar exponential curve to the chart in my previous post.

I think the existing financial planning is stretching credibility. The fiscal rule "to ensure that PSND ex is falling by the fifth year of the forecast period" is questionable enough, given that with 4 budgets to go before debt is forecast to fall it is extremely likely that those budgets will make changes such that debt is always forecast to fall in 5 years, but never actually falls. 

That credibility is even further stretched when unspecified cuts to Departmental budgets are used as the balancing item to make the 5-year debt figure fall, regardless of how improbable those cuts may be in practice. So I agree, the scope for big spending in manifestos has to be limited particularly as local govt is just as stretched (if not moreso) than central govt and a solution will need to be found there.

Linton

hugheskevi said:

Linton said:

1)  SP failure to  keep up with average wages  does represent a reduction in relative standard of living over time.  If SP is a major part of retirement income failure to keep up with with inflation will lead to real poverty.  So in my view a double lock  of inflation and average wages is essential.  The 2.5% minimum is a political fudge that cannot be justified in the long term.  However its effect in the short/medium term is relatively small since at least either inflation or earnings growth are normally above this value.

If the 2.5% minimum cannot be justified in the long-term, how can a State Pension that constantly increases as a % of earnings over time be justified, as would happen under a double lock of CPI and earnings? When do you think changes would be made, given it is an inherently unsustainable uprating arrangement?

.....

I dont believe there  can be a simple formula solely based on the previous year's data and blindly applied each year that prevents all undesirable long term effects no matter  what long term economic trends  there may be.   The past 13 years since the triple lock was standardised have been unusual in that inflation has been higher than earnings growth.  Despite some periods of high inflation, generally the reverse was true since WW2. This made life easier as NI is based on a % of earnings and so SP increases in line with earnings  were both affordable  in the long term and exceeded inflation.

So what to do? Perhaps a formula based on the average of inflation and earniongs growth with a reset every 10 years?  However that could be too open to political ideology and short term  expediency.

Grumpy_chap

Linton said:

1)  SP failure to  keep up with average wages  does represent a reduction in relative standard of living over time.  If SP is a major part of retirement income failure to keep up with with inflation will lead to real poverty.  So in my view a double lock  of inflation and average wages is essential.  

But the link to inflation and wages is incorrect, particularly in the way it is applied, because wage increases tend to lag behind inflation, to such an extent that the inflation is falling when wage increase peak.

"State Pensions are expected to rise by 8.5% in April 2024 in line with earnings. This follows a 10.1% increase in line with Consumer Price Index (CPI) inflation the previous year"
From https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/

Wage rises are higher now than inflation:
https://www.bbc.co.uk/news/business-67402491

Anyway, let's compare the 8.5% increase in state pension against the "shock-horror" headline for stamp prices currently on this site's landing page:


We do need to be consistent.  Either an increase of 8.5% is fair and just, in which case so is 8%.  Or an increase of 8% is shocking, which makes 8.5% even more outrageous...

Alex444

No it should be kept

Lowest pension in Europe and going to highest retiral age, got to be some perks,  it will soon be getting taxed as well!🤬

Ganga

Alex444 said:

Lowest pension in Europe and going to highest retiral age, got to be some perks,  it will soon be getting taxed as well!🤬

Mine will be next year !