State pension spending is forecast to “account for nearly half” of Department for Work and Pensions’ (DWP) benefit expenditure, new research claims,
The Resolution Foundation’s “What a racket” report into the retirement benefit and intergenerational fairness has renewed calls to axe the triple lock due to its growing cost.
Thanks to the triple lock, state pension payment rates are guaranteed to go up by either the rate of inflation, average wage growth, or 2.5 per cent; whichever is highest.
Last year, the Office for Budget Responsibility (OBR) estimated the uprate mechanism will cost the UK Government £10billion more a year than initially forecast if it remains in place.
The state pension triple lock’s future is in doubt
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GETTY
The Resolution Foundation’s analysis reveals that over the past twenty years, pensioners have enjoyed living standards improvements at triple the rate experienced by working-age people.
They stated: “At the current juncture, it is simply unfair to continue with a policy of the state pension rising by more than average earnings.”
Since 2011-12, typical pensioner incomes have exceeded those of non-pensioners. Today, retired individuals face lower poverty rates than the general population and are half as likely as children to live in poverty.
The think tank’s report report disputes the widely held view that the triple lock deserves credit for transforming pensioner fortunes, claiming improvement in retirement incomes actually occurred during the early 2000s, well before the policy came into effect.
State pension spending will make up nearly half of DWP expenditure, the think tank’s research claims
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RESOLUTION FOUNDATION
Other state pension alternatives have been floated
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RESOLUTION FOUNDATION
By the time the triple lock was implemented in 2012, typical pensioner incomes had already reached parity with those of working-age households.
Since its introduction, state pension payments have risen at double the pace of unemployment benefits for working-age claimants. The foundation attributes the substantial reduction in pensioner poverty during the 2000s to different policy interventions entirely.
The Minimum Income Guarantee, which evolved into Pension Credit in 2003, created a far more generous safety net for older people. In real terms, the weekly income floor for single pensioners under 75 rose from £139 in 1997 to £208 by 2011.
This drove a 15.8 percentage point decline in relative pensioner poverty between 1997-98 and 2011-12.
What has the impact of the state pension triple lock been on the public’s finances | OBR
Notably, since the triple lock’s introduction, pensioner poverty has actually increased by 2.3 percentage points, partly due to rising numbers of privately renting retirees.
The report warns that tax revenues depend heavily on worker earnings, meaning faster-growing pension commitments would force continuous cuts elsewhere or balloon public debt.
Britain’s demographic trajectory compounds the problem, with the ratio of working-age adults to over-65s projected to fall from 3.3 to 1.9 between 2025 and 2075.
State pension expenditure currently stands at £154 billion annually, representing 5 per cent of GDP and 11 per cent of government spending.