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Steve Webb: Power of grey vote will protect pensions triple lock

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With a referendum outcome that took the financial markets and the pollsters by surprise, crystal ball gazing the morning after the night before feels like a more hazardous activity than normal.

But there are some things we can say with a reasonable degree of confidence about the potential impact of the Brexit vote on the pensions landscape in the UK.

Starting with today’s pensioners, the early evidence appears to be they turned out to vote in great numbers and voted overwhelmingly to leave the EU. Following such a huge demonstration of the power of the grey vote we can take with a pinch of salt any suggestion that any austerity measures which now follow would be focused on older people.

Whilst there were threats during the referendum to scrap the triple lock on the state pension, it would be odd for a government which included the promise in its last manifesto and wants to be re-elected at the next election to prioritise a cut which would affect the most powerful voting bloc in the country.

With regard to tomorrow’s pensioners, the fundamental truth about pensions has always been that strong pensions depend ultimately on a strong economy.

And there can be little doubt that the considerable political and economic uncertainty which we now face as a nation will have a negative economic impact, at least in the short-term.

Within hours of the result of the referendum becoming apparent, the value of our currency has plunged, rating agencies are talking about downgrading the UK’s credit status, and some overseas investors are questioning whether to continue to invest in the UK.

But pensions are, above all things, a long-term project. The short-term turmoil will certainly be damaging and the period of uncertainty we now face is likely to be measured in years rather than in days or months. But at the same time, the key question is what Britain’s exit will mean for the long-term fundamentals of our economy.

If we can forge new trading relationships with the EU and the rest of the world in the post-Brexit environment then our centuries-long role as a trading nation need not be fatally undermined.

Of course, not everyone has the luxury of taking a long-term perspective and there will be individual investors concerned about the value and composition of their portfolios and wondering what action to take.

On a day like this it is more important than ever for individuals to take informed, impartial  advice before making swift decisions in response to short-term turmoil.

There are many important pensions issues raised by this vote, to which answers are unlikely to be clear for a long time.

A key question is how far the UK will be able to devise its own rules for the financial services industry from now on, or whether we will continue to have to adopt EU standards if we wish to trade with the EU.

But the fundamental issue remains the economy. Ultimately, it will be the skill with which a new economic settlement between the UK and the rest of the world is negotiated that will be the key determinant of the quality of life in retirement of millions of UK citizens.

Steve Webb is director of policy at Royal London and former pensions minister

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. If the young are in rebellion against what has happened today (speak with my sons!), I would hope that a future Government will do them a favour and remove the unsustainable triple lock, blaming it on Brexit thereby deflecting flack at the ballot box. I would like to think that but our awful politicians which have alienated half a country are unlikely to do so. Doing what is right when it risks losing the next election is not the way short term politicians think.

  2. Just an idle thought, but the triple lock was introduced for one reason and one reason only: to end the Daily Mail headline that followed every increase to the State Pension in a year of low inflation “Pensioner fury as State Pension increased by just *big letters* 68 PENCE A WEEK”.

    With the New State Pension, both inflation and earnings would have to be under 0.64% per annum for a Daily Mail headline about pence a week to be generated. Hence the need for the 2.5% minimum floor goes out the window.

    Of course, they should have got rid of it at the same time as introducing the new headline figure, but there you go.

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