A radical overhaul of Britain’s state pension has been proposed by a former Bank of England economist in what would be a radical overhaul to the Department for Work and Pensions (DWP) payment.
Neil Record has called for the triple lock to be “abandoned” with a graduated payment system based on age being introduced instead.
The economist branded the current arrangements a “mess” that costs taxpayers £147billion annually, based on figures from the Office for Budget Responsibility (OBR).
His reforms would see younger pensioners receive reduced payments, with amounts increasing as recipients grow older.
A former Bank of England has argued the state pension triple lock should be ‘abandoned’
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GETTY / PROSPERITY INSTITUTE
Mr Record argued that the existing framework has become financially and morally untenable, with retirees gaining disproportionately compared to the workforce funding their benefits.
Since its introduction in 2010, the triple lock has guaranteed state pension payments rise by at last 2.5 per cent, which older Britons receiving higher income boost than the working-age population.
According to Mr Record, while average salaries increased by 3.3 per cent annually between 2012 and 2013, pension payments rose by four per cent each year due to the triple lock formula.
This seemingly modest 0.7 percentage point difference has created a substantial gap. Without the triple lock mechanism, weekly pension payments would currently stand at £208.65 rather than £230.25.
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“So pensioners have done better than workers to the tune of 10.3 per cent over the past 14 years,” Record wrote in The Telegraph.
The former Bank of England economist’s blueprint for reform contains four key elements designed to create a more sustainable system.
He advocates replacing the triple lock with a mechanism that links pre-retirement increases to average earnings growth, then switches to inflation-based adjustments after retirement.
“This is exactly what private sector defined benefit occupational pensions do,” Record explained, noting his proposal would be more generous than most private schemes by excluding inflation caps.
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The economist also wants to eliminate what he terms the “cliff-edge retirement payment” where individuals receive nothing at 65 years and 11 months but collect £230 weekly once they turn 66.
Mr Record’s proposed taper system reflects changes in employment patterns and demographics since the post-war era.
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Pensions Minister Torsten Bell has promised to keep the triple lock in place
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PAHe highlighted that retirement age was established when life expectancy was at least fifteen years shorter than current levels.
“Today, there are numerous part-time and casual jobs and people in their 60s are often capable of doing them,” Mr Record stated.
His graduated payment structure would provide smaller amounts to younger retirees, with benefits increasing incrementally based on age.
Earlier this week, Pensions Minister Torsten Bell confirmed the Labour Government would commit to keeping the triple lock in place throughout this current Parliament.