Labour’s pledge to retain the triple lock is “sensible in terms of winning votes”, but the continuation of the policy is “fraught with problems”, according to a pensions expert.
The triple lock guarantees the state pension rises each year in line with inflation, earnings or by 2.5% – whichever is higher.
Labour’s General Election manifesto document said the party would retain the triple lock and that it would also “undertake a review of the pensions landscape to consider what further steps are needed to improve pension outcomes and increase investment in UK markets”.
The document said: “Our pensions review will consider what further steps are needed to improve security in retirement, as well as to increase productive investment in the UK economy.”
The central dilemma is finding a balance between protecting current pensioners and ensuring intergenerational fairness— Jon Greer, Quilter
Jon Greer, head of retirement policy at wealth manager Quilter, said: “Labour has unsurprisingly pledged to uphold the triple lock in its manifesto. While sensible in terms of winning votes the continuation of the triple lock is fraught with problems.”
He said the triple lock “presents a significant fiscal challenge that no party has been willing to fully address”.
Mr Greer added: “If Labour win, then during its announced review of the pensions landscape, the triple lock should be put under a microscope.
“The central dilemma is finding a balance between protecting current pensioners and ensuring intergenerational fairness, especially given the UK has an ageing population that will continue to make the state pension ever more expensive.”
Becky O’Connor, director of public affairs at pension provider PensionBee, said: “The state pension is a vital safety net for most retired households and must be preserved at a meaningful level. This is relevant not only for today’s pensioners but also for future generations.
“To preserve the state pension, some form of index-linking is necessary as without decent and reliable rises to the state pension, it will be today’s young workers who suffer most when they reach their 60s and 70s, as personal and workplace pension savings are not currently at a level where they could even come close to replacing state pension benefits.”
The industry should prepare for some robust conversations— Tom McPhail, The Lang Cat
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “It’s hoped that the state pension is also included in this review to make sure it remains sustainable in the long term and that the state pension age doesn’t need to be hiked further in a bid to manage burgeoning costs.”
Tom McPhail, director of public affairs at consultants The Lang Cat said: “On the other side of the election, whoever wins, demands will be placed on pension schemes and their investment strategies to adapt to meet the political agenda.
“The industry should prepare for some robust conversations ahead on how fiduciary duty is defined and interpreted.”
Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), said: “The Labour Party manifesto is silent on potential changes to pension tax relief, but this doesn’t mean they are off the table.
“Any new government which has pledged not to raise rates of income tax, NI (national insurance) or VAT (value added tax) will be looking elsewhere in the tax system for extra tax revenue, and the cost of pension tax relief will attract a lot of attention within the Treasury.
“Tax breaks for pensions such as large tax-free lump sums or the ability to pass on certain pensions tax-free on death are likely to come under close scrutiny in the early months and years of a new government.”
