Millions more people would struggle financially later in life if the state pension triple lock is scrapped, a new analysis has said. Britain could be heading towards a “retirement disaster” if the state pension were linked only to earnings growth, and FOI to the Department for Work and Pensions (DWP) has revealed.
Former pensions minister, Sir Steve Webb, has warned that abolishing the policy now would create a crisis for millions of Brits.”The triple lock cannot last forever. But scrapping it now would trigger a retirement disaster,” he said. “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.” To assess the impact of potential changes, Sir Steve submitted a Freedom of Information request to the DWP, which revealed some worrying figures.
According to the FOI, a switch to an earnings-only link would leave around 19 million people without enough income in retirement – over four million higher than current projections.
Sir Steve, an ex-Lib Dem MP who served as the Minister of State for Pensions in David Cameron’s coalition government, argued that a strong state pension remains essential because private pension provision is failing to provide adequate support.
Writing in The Telegraph, he said: “In reality, there is a powerful argument in favour of keeping the triple lock, at least in the short to medium-term.
“This is because of what is currently happening to the pension prospects of the working-age population. In short, a decent state pension remains vital because the other leg of retirement provision – private pensions – is simply not pulling its weight at the moment.
“This is especially true for women, who are most at risk of having only modest private pension income to top up their state pension.”
According to Sir Steve, the problem stems largely from the long-term decline of traditional final salary workplace pension schemes in the private sector, leaving fewer workers with the generous retirement income enjoyed by previous generations.
He added that the decline of generous final salary pensions means fewer workers now retire with strong private incomes, while newer defined contribution schemes have not had enough time to build meaningful savings since auto-enrolment began in 2012. The FOI response found 19 million people could face inadequate retirement incomes, rising to 26 million – more than three quarters of the working-age population – if the state pension were linked only to inflation instead of earnings.
“We simply cannot pull the rug from beneath them” by weakening the triple lock, despite growing criticism that the policy is too costly and unfair on younger taxpayers, he said, adding that many people nearing retirement remain heavily reliant on the state pension and expressing hope the new Pensions Commission will propose reforms for the 2030s.