It would be “madness” to permanently abandon the triple lock on state pensions in response to the Covid-19 pandemic without more detailed assessment, according to Hymans Robertson.
The firm said that implementation of the triple lock had only increased state pension by 2.5 per cent of national average earnings since it was put in place in 2010 – from around 20 per cent of average earnings in 2010 to around 22.5 per cent in 2020.
Hymans Robertson Partner, Chris Noon, said: “It’s difficult to see how this 2.5 per cent change has substantially shifted the position of pensioner poverty when the threshold for this is 60 percent of median household income.
“Whilst it makes sense for the government to consider how it responds to the short-term implications of furloughing for state pension increases in 2021 and 2022, it would be madness for them to throw out the triple-lock without a more detailed assessment of current pensioner poverty in the UK.”
The firm did concede that it would be sensible to suspend the earnings element temporarily over 2021/22, amid concerns that strong economic recovery after the peak of coronavirus could cause triple locked state pensions could rise by as much as 21.3 per cent over a two-year period.
Noon stated that pensioner poverty should be properly assessed by the government before it made any “knee-jerk policy decisions”, adding that temporarily addressing the upcoming anomaly “would be sensible but it shouldn’t be an excuse for throwing out the triple lock”.
This is because triple locked state pensions increase by whichever is higher, earnings growth, inflation or 2.5 per cent.
Hymans said the state pension would be £10.10 per week higher than it would have been had it just been linked to the cost of living and £11.85 per week higher than if it had just been linked to earnings increases.
Noon concluded: “We would urge the Treasury to see the furloughing situation simply as an anomaly rather than using it as an excuse to renege on a manifesto promise to maintain the triple lock.
“Relative to national average earning, the triple lock has increased state pension modestly over the last 10 years. Removing it now would be short-sighted from a pension policy perspective.”
— to www.pensionsage.com