Triple lock increase for April 2027 is 3.9% (probably)

SarahB16

However you are assuming that ‘prices’ means CPI. If Andy meant that, why didn’t he say so?

I genuinely don't know if he did mean CPI but didn't say CPI due to the wider audience who will watch the speech on the news.

Did his speech writer deliberately dumb down 'CPI' to 'prices' thinking everyone knows what prices means but not everybody knows what CPI is.

I know on here we all know what CPI is but you would be surprised how many people do not know what CPI is.

I wonder if we are reading too much into the use of the word 'prices'. Only time will tell…

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152859#Comment_82152859

You could put it another way.

The Triple lock maybe mathematically flawed, but it has worked to improve the value of the SP, which had previously declined significantly compared to average earnings. But now it has done its job, it is maybe time to change it.

michaels

https://forums.moneysavingexpert.com/discussion/comment/82152648#Comment_82152648

I agree - as an above average soon to be state pensioner I think I will probably benefit more from the lower taxation needed that I will lose from the loss of wage growth indexation over my lifetime.

The losers are lower earning pensioners and future retirees for who will miss out on the state pension keeping up with earnings. Luckily financial education in this country is so bad that it is the losers who are probably most keen to see this 'intergenerational fairness'. Not sure whether to laugh of cry……

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82152952#Comment_82152952

AIU the proposed system will keep up with earnings growth . The problem is that the triple lock has meant the SP has been increasing above earnings growth.

LHW99

https://forums.moneysavingexpert.com/discussion/comment/82152968#Comment_82152968

There do seem to be a number of commentators suggesting that not enough will be saved by the change to provide the sort of money likely to be needed for a "free at point of need" National Care Service. So unlikely IMO that taxation would go down (or even remain the same) in order to fund it, however necessary the scheme is.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82152895#Comment_82152895

The time for the triple lock has not past. It is essential that links to both inflation and earnings remain to ensure future pensioners are not left in either absolute or relative poverty, though the 2.5% link could be arguable. However it should be implemented in a way that sustainably achieves that objective. Andy Burnham's proposal that appears to calculate the earnings link over a longer period should do that and should be welcomed.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82153055#Comment_82153055

It will not fund a new care scheme full stop.

However it is politically a clever way of selling modifying the triple lock, by linking it with advantages for older people needing care.

A way to credibly to try and fend off all the political flak it will bring.

mrklaw

a very simplified care scheme could be an additional centrally funded layer on top of current council funded care for example. Might be less expensive and leverage existing local provision.

if its main job is to avoid the (IMO) overreach councils seem to have to take all your savings down to the barest essentials it can be a good thing. They have more powers than HMRC I sometimes think.

SnowMan

https://forums.moneysavingexpert.com/discussion/comment/82152859#Comment_82152859

The ratchet effect of the triple lock has been to increase state pension by 14% overall relative to earnings which isn't unexpected given the formula. Many people will argue that is has been sensible to bring up low income pensioners' incomes to above poverty levels. But of cause above earnings increases can't go on indefinitely.

There is still a ratchet effect going on with a double lock that increases at CPI or 2.5% each year, but that ratchet is to increase the state pension by more than CPI (when CPI is below 2.5%). From 2011 to 2027 that ratchet would have had the affect of not just bringing CPI increases up to earnings increases but above earnings increases. That would have meant overall the state pension would have increased relative to earnings by 5% as mentioned earlier.

Over the whole period 2011 to 2017 earnings have increased relative to prices by only about 0.22% per annum which is historically very low. Perhaps 1.5% - 2% is a typical long term assumption for long term growth of earnings over prices. So the ratchet didn't need to do much lifting to push the increases above earnings from 2011 to 2027. Also 2011 to 2027 arguably includes an abnormal number of years where CPI has been below 2.5% (it's the variation in CPI that pushes it below 2.5% in some year that is important for the new ratchet not really the absolute level of CPI).

So if the new proposed double lock had applied from 2011-2027 (with the long term earnings commitment applying for the period from 2011) it would be the higher of CPI and 2.5% that would be determining the increases in the immediate future rather than the earnings underpin.

However in practice I am assuming (without doing any real analysis) that over the long term that earnings growth assessed from 2030 will outpace the maximum of CPI and 2.5% (unlike the 2011 - 2027 period). That would mean we would be back to a situation over time where state pension was just increasing with earnings each year. Of course that causes political difficulties in years where earnings are either negative or less than CPI, 'why has my state pension gone down?', 'I can't afford things as my state pension has gone up less than prices?'. But for the starting year (possibly starting years) at least that problem doesn't arise. And (depending on the precise mechanics) the first double lock increase say in 2030 will still be in line with the existing triple lock (because the cumulative earnings increase will be for a period of 1 year) it's just that if the first increase is with CPI or 2.5% the excess over earnings will be clawed back at a later date.

So overall the double lock is a very sensible proposal in my view.

mrklaw

(Quoted pos removed by Forum Team)

by ‘highest’ you mean ‘anyone with savings more than 16k’ which isn’t a fortune (no its not poor either). They also take your income down to a bare minimum that the council decides is enough to live off - so you can’t even decide to live a ‘nice’ level or even a moderate level - its barely above state pension income before they go ‘no thats enough, we’ll take the rest thanks’.

I swear the council has more power to take your money in old age than HMRC does. Never mind gifts from excess income or the 7 year rule - HMRC might be ok but the council will come for you.

I agree if you can safely afford it, you should contribute. I don’t know how they draw that line though - the current one feels too harsh. He did say you’ll never need to pay out of your state pension which is a pretty low bar and about what the council already uses as an income threshold. So it may not be much different from what they currently have - but having national oversight or top up rather than just leaving it to councils?