Pensioners face threat to retirement income after calls to slash Pension Payouts

An authoritative think-tank report called for the abolition of the so-called “triple lock’ which guarantees rises. 

PENSION

The lock means state pensions go up by either inflation, earnings growth or 2.5 per cent, whichever is the highest. 
But it is costing taxpayers £6billion a year and “needs to end”, said the Institute for Fiscal Studies.

The constant increases will “at some point become prohibitively expensive”, the institute warned. 
The guarantee has helped make today’s pensioners better off than any previous generation, with average incomes for the first time higher than those of people in work. 

But current workers whose taxes help fund pensioners are unlikely to end up with retirement incomes as good as their parents, the think tank warns. 
They are also likely to have to work until they are older. 
Further increases in pension age, already expected to rise to 69 by the 2040s, are “vital to the sustainability of the system” the IFS says. 
The triple lock was introduced by Chancellor George Osborne in his 2010 Budget to provide pensioners with “the income to live with dignity in retirement”. 
Office for Budget Responsibility projections forecast that continued use of the lock would add well over one per cent of national income to spending on pensions by the middle of the century. 

Speaking to the Pensions Management Institute in London, IFS director Paul Johnson said a large proportion of those retiring now will be better off than they were on average during their working life. 
Pensioner incomes are expected to carry on rising for at least another 10 years. 

But he added: “The longer term future looks very uncertain. Those now in their 20s, 30s and 40s may well end up with lower incomes in retirement than their parents.
"The focus for policy needs to be on getting private provision right, with more risksharing, and a rational and stable tax policy.” 
Dot Gibson, National Pensioners Convention general secretary, said: “It’s nonsense to talk about the triple lock being unaffordable. 
The truth is that even the triple lock is only giving today’s pensioners £3.35 a week extra – and for millions of women that figure will be just £2. 
“Given that we have bailed out the banks with billions of public money, many older people will now think it’s a bit rich to be told the country can’t afford to give them an extra £3.

 

“We’ve got to get our priorities right and keeping older people on low pensions is ultimately a false economy because it leads to ill-health and social isolation which ends up costing the health service more. 
“The UK has one of the least adequate state pensions in the developed world. The triple lock is no panacea but it’s certainly not unaffordable.” 
Kate Smith, regulatory strategy manager at pension group Aegon, said: “At £6billion a year the triple lock is expensive but it represents a very important protection of people’s retirement income.
"Just seven per cent of the population are on track for the retirement income they want or expect and the state pension is likely to make up a significant proportion of many people’s incomes. 
“Pensioners are particularly susceptible to the effects of inflation as they tend to rely on fixed incomes. Even in the current low inflation environment, it’s important to take a long view as many people will spend 20 years or more in retirement.