The Government’s triple lock on pensions, which will see payments rise by at least 2.5 per cent is “absurd”, according to the Institute of Economic Affairs.
The lock, which was announced in June’s emergency Budget, will see state pensions rise in line with earnings, prices or 2.5 per cent, whichever is higher, from April.
IEA editorial and programme director Philip Booth says in times of economic stringency, it could affect the sustainability of pension funding. He says: “If productivity falls and tax relief falls, pensioners will not suffer at all from that and the proportion of national income the Government has to spend on pensions will increase.”
It is reasonable, he says, that pensions rise in line with inflation and a case can be made for linking them to salaries but the triple lock means pensions are likely to rise faster than salaries.
Hargreaves Lansdown head of pensions Tom McPhail says: “Policy changes that the Government is making to the state pension might, to some extent, mitigate this problem.”