Triple lock on state pensions under threat
According to a group of MPs, the state pension triple lock, which was introduced in 2010, should be stopped.
The triple lock was introduced by the Liberal Democrats during their coalition reign with the Conservatives. It guarantees that the state pension would increase each year either by 2.5%, earnings growth or inflation, depending on which was the highest. The Work and Pensions Committee has said that the triple lock is unfair to younger families and is not sustainable, the government has said that it has committed to the triple lock state pension until at least 2020.
Pensions used to be linked to inflation, which meant that in relation to the working population, the retirement income was lower. Since the introduction of the triple lock in 2010, the state retirement pension has increased by £1,100 per year. In April 2016, the state pension saw a further increase of 2.9%.
Despite the advantages for pensioners, MPs say that families of working age and young people have been put at a disadvantage. They added that those born between 1981 and 2000 face being worse off than their predecessors. MPs also argued that the increasing costs of the state pension were not sustainable, with the last tax year’s total cost coming in at £98bn.
The committee suggested that the basic and new state pension could be linked to average earnings, with a formula in place to protect pensioners when growth of earnings is lower than inflation. This demonstrates that retirement planning is crucial for everyone, whether they live in the Wirral or London.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interests rates and tax legislation.
