This Site predicted the suspension of the pensions triple lock, so it’s no surprise here.
The problem with the commitment to increase pensions every year by the highest of pensions, earnings or 2.5 per cent is that it did not anticipate a huge fall in earnings like that caused by the Covid-19 pandemic, followed by a similarly whopping rise when everybody went back to work and pay packets re-balanced.
It meant the highest of the three benchmarks – this year – is a massive eight per cent increase. And the Tories don’t want to pay it.
Back in July, I suggested the Tories were making a big fuss about nothing because they could impose a stop-gap increase that reflects the increase in the cost of living (which is what the triple lock is supposed to do).
It turns out that the Tories are doing something similar. Work and Pensions Secretary Therese Coffey said that – for this year only – pensions would rise by inflation or 2.5 per cent, whichever is higher. The earnings increase will be restored to the calculation next year.
The decision has caused bitter resentment in some quarters, because people are upset that the Tories have broken a manifesto promise.
But this misses the point completely.
The point is that the UK state pension is one of the worst pension deals in the whole world.
On retirement, our pensioners will receive, on average, 29 per cent of their former earnings. This compares with an increase of 0.6 per cent in the Netherlands, more than 90 per cent of former earnings in Portugal, Italy and Austria, and an OECD (Organisation of Economic Co-operation and Development) nations’ average of nearly 63 per cent.
In fact, the UK’s pensions deal comes in at slightly worse than that provided in… Mexico.
This was a chance to level up the UK pension with some of our closest neighbours – but the Tories didn’t want to. That’s why people should be angry.
According to this she said "Pensioners must not benefit from a statistical anomaly" with a state pension lower than Mexico this slob makes such an announcement. pic.twitter.com/Qba1XiMls7
— Carole Hawkins (@hawkins_carole) September 7, 2021
Of course, with the national insurance increase that the Tories say will pay for social care (eventually), pensioners will be worse off than ever – because pensioners who are still earning an income will pay towards it.
And there’s another aspect to this.
It is the rivalry between the old and the young over state benefits, the perception that pensioners get more than their fair share, and that they should lose some in order to correct a perceived imbalance.
This is utter piffle.
As Craig Berry states in The Guardian,
We can and should spend more on social security for young and old people alike.
To believe that a Conservative government would invest what it saves by removing the triple lock on today’s young people requires some magical thinking.
In practice, by reducing the state pension accrual rate (the entitlements we build up in return for paying national insurance), scrapping the triple lock would effectively amount to a significant tax hike on young people.
That’s because the tax they pay now would entitle them to a lower income in retirement than previously anticipated.
So it is ridiculous to suggest that we need to cut pension increases in order to help the young. It simply won’t happen.
Let’s face it – it simply hasn’t happened.
The (alleged) social care-related increase to National Insurance will affect young people and pensioners alike.
Because that’s what Tories are like.
They don’t take away from one group that needs help, in order to give to another.
They take from both, in order to give to themselves – as you can see with Boris Johnson’s National Insurance hike.
My only question is, do we believe them when they say they’re going to bring the triple lock back?
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