The former pensions minister has warned that scrapping the triple lock will spell disaster for around 19 million pensioners, as fears mount about the ever-growing pensions bill.
Triple lock ensures that the State Pension rises by earnings growth, inflation or 2.5% – whichever is higher – but the bill is growing astronomically and critics say it is not sustainable for the future. However, Sir Steve Webb warned that abolishing the pledge would plunge millions of pensioners into a financial disaster, without enough funds in retirement. He said: “The triple lock cannot last forever. But scrapping it now would trigger a retirement disaster.”
He explained: “The level of retirement saving in Britain today has all the features of a slow-motion car crash and scrapping the triple lock on the state pension would make matters worse.”
His Freedom of Information request to the Department for Work and Pensions showed switching to an earnings-only pledge would leave around 19 million people without enough income in retirement. This was four million higher than current projections.
The former minister said the State Pension remained vital because the private pension was not “pulling its weight”. He said this was “especially true for women”, since they were most at risk of having modest private pension incomes.
He suggested the decline of the final salary workplace pension schemes have contribued to the issue, which traditionally meant workers could reap healthy pensions and enjoy their retirement.
However, the Government has faced calls to review triple lock since the cost is spiralling. According to the Office for Budget Responsibility (OBR), the triple lock has pushed up spending on the State Pension much faster than if it were tied to average earnings.
It estimated that uprating by the triple lock rather than earnings will have added £15.5billion to State Pension spending annually by 2029-30.
Mr Webb said he hoped that the upcoming report from the new Pensions Commission would outline improvements for the 2030s.