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Steve Webb pushes for pensions triple lock beyond 2015

Pensions minister Steve Webb is pressing his party to keep the triple lock as he makes the case for index-linked state pensions.

Speaking at a fringe event on retirement at the Liberal Democrat conference in Glasgow today, Webb said indexation of state pensions is crucial.

In 2010 the Government introduced a Lib Dem manifesto pledge to ensure state pensions rise with earnings, inflation or 2.5 per cent, whichever is highest.

In July, the Institute of Fiscal Studies argued the policy is “not affordable” but it retains the support of prime minister David Cameron.

Webb said: “We have done it every year even though the sceptics have said the Government is broke, we have done it. I hope our party will continue doing it for the next parliament too. The principle of a properly indexed pension for the current generation is fair.”

No party has committed to keeping the triple lock after the next general election and Webb has previously said it can not be guaranteed. The Government has refused to enshrine the principle in the state pension reform bill in the House of Commons.

Labour’s position on the triple lock has been under scrutiny after shadow chancellor Ed Balls indicated he would include pensions in a cap on welfare spending.

Defending the triple lock policy, Webb said: “People forget that once they are retired they will draw their pension for 25 years so it matters not just what your pension is when you retire but what happens through retirement. That is why indexation of the state pension is so important because private pensions won’t go up with the value of inflation, that’s the norm.

“If it’s inflation protected then it’s really low to start with so most people get it higher and buy it at a flat rate with no inflation protection. State pension inflation protection really matters and the question is how to make it affordable.

“Firstly, pension age is going up so you will get a pension later in life. Secondly, the level of the state pension is not a king’s ransom but is inflation protected. We could have a higher level and not protect it or people could draw it earlier. It is a level that is clear of the means test and inflation protection is crucial. Actually, our state pension reforms reduce the costs but make it more sustainable by making better use of the pot we have.”

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Comments

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

  1. Test comment. please ignore.

  2. The tripple lock is a laudable objective and I appreciate the arguments made in this article for it. However, as Equitable Life has learned (and shown us) having a guarantee has a cost. Steve Webb is championing the idea of companies providing defined aspiration schemes – one itteration of which is a level defined benefit pension with no guaranteed increases, but increases paid out of good investment returns (i.e. when they can be afforded). This is the way that most schemes provided pensions 30 years ago, before they were forced to guarantee increases under legislation. If we have more money to spend on pensions in the future, let’s use it to increase the starting level to something decent (so we are not the poor cousin in europe) and provide increases in payment as we can afford it (hopefully each year) in the budget process.

    If we do guarantee increases, I have to say there is no logic in the tripple lock; remove the fixed 2.5% component as it does not necessarily bear any relationship to what people need to live off. If we have no inflation – prices or earnings, why do state pensions need to increase? The best of price inflation and earnings inflation must be sufficient, unless we are making up for an inadequate starting point!!

    As a final point, before any steps are taken to commit us to a greater long term cost on guaranteed tripple (or double lock), we need to mandate a mechanism to index state pension age with life expectancy of individuals.

  3. Webb states a properly indexed state pension is fair yet he refuses to exclude Clause 20 in the new pensions bill which would give annual indexing to the 4% of state pensioners who have their pension frozen just because of where they spend their retirement. When in opposition Webb tabled an EDM proclaiming the unfairness of this disgraceful policy as all state pensioners have paid their NI contributions under the same terms and all are entitled to annual indexing. On becoming pensions minister he has done an about face and ignores the plight of the 4% many of whom receive a pension of less than £15 a week. This is blatant discrimination on behalf of the government and contravenes the the aims set out in the new Commonwealth Charter which states commonwealth countries are “implacably opposed to all forms of discrimination”. In my book that amounts to hypocrisy and the credibility of the pensions minister’s words is questionable, shame on him.

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