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.”