Keeping pensions 'triple lock' would push state pension age beyond 70
Keeping the pensions 'triple lock' beyond 2020 will result in the state pension age increasing above the average life expectancy for men who live in deprived areas, a report from the Work and Pensions Committee has warned today.
The triple lock, introduced by the Conservative-Liberal Democrat coalition, is a guarantee that the state pension will rise each year by at least 2.5%, or the rate of inflation or growth in earnings - whichever is highest.
In its 2015 election manifesto, the Conservative party pledged to extend the triple lock until 2020. There were concerns that this promise would be broken in the event of a Brexit vote, but in November's Autumn Statement the government confirmed it will remain in place for the remainder of this parliament.
But from 2020 onwards the days of the triple lock look numbered, as it is viewed as unaffordable for the government in the long term.
The prosperous will benefit most
This point was highlighted in the report published by the Work and Pensions Committee, which
commissioned the Institute for Fiscal Studies to estimate state pension age increases if the current rate of annual increases is sustained.
The report found the state pension age would need to increase to 70.5 years by 2060. This is higher than the current average male life expectancy rate in 162 areas in Scotland and 26 areas in England.
Frank Field, committee chair of the Work and Pensions Committee, said: "With the triple lock in place, the only way state pension expenditure can be made sustainable is to keep raising the state pension age. This has the effect of excluding ever more people from the state pension altogether.
"Such people will disproportionately be from more deprived areas and manual occupations, while those benefiting most will be the relatively prosperous."
Altmann has previously suggested moving to a 'double lock' after 2020, to give pensioners the better of either prices or earnings inflation.
She says: "It is dangerous for public finances and for pension policy as a whole to bake in a 2.5% figure that doesn't relate to anything in the economy. "Moving to a double lock leaves it to the government of the day to assess the state of the economy and adjust pensions accordingly. And actually when you do the numbers, you save a lot more money by changing the uprating of the pension than you do by increasing the state pension age."
Altmann has also previously pointed out that the problem with continually raising the state pension age is that it is unfair on certain groups in society, because there is a marked variation in life expectancy: low earners, people with heavy manual labour jobs and those who live in industrial areas have lower life expectancies.
This story was originally written for our sister magazine, Money Observer.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).