A leading Conservative MP has urged the UK government to temporarily suspend the ‘triple lock’ pensions to prevent an “unrealistic” leap in state pension rates.
Mel Stride MP, chair of the influential Treasury select committee, gave his backing to proposals reportedly floated by Treasury officials to depart from a key Conservative election pledge.
The ‘triple lock,’ a feature of Conservative manifestos over the past decade, guarantees that state pension values will increase by the highest of average wages, prices, or 2.5%.
But millions of UK workers on furlough have seen 20% pay cuts as a result of the coronavirus crisis, meaning average wages will be far higher next year if large numbers return to work on full pay.
“The pensions triple lock will produce unintended consequences in its current form,” said Stride on Friday. “A way forward might be to temporarily suspend the wages element of the lock. This might not entirely conform to the Conservative party manifesto, but I think most people would recognise that a potential double-digit percentage increase is unrealistic.”
The comments could help pave the way for the government to announce such a move, with a Downing Street spokesperson declining to rule out a temporary suspension earlier this week. Think tanks have also backed the change.
But a government source said on Wednesday (17 June): “These are unique and challenging economic circumstances and we can’t hide from that.
“Decisions on tax and pension policy are set out by the chancellor in budgets, but there are no plans to abolish the triple lock and we will always stand by pensioners.”
It comes after the Financial Times reported Treasury fears that the policy “could soon become unaffordable” in the wake of the coronavirus crisis and its impact on the labour market.
Officials were said to be concerned about forecasts that average wage figures in 2021 will be far higher than this year, forcing a corresponding sharp rise in state pension levels.
Any changes may still prove controversial. It sparked a plea for caution from the Pensions and Lifetime Savings Assocation (PLSA), which represents 1,200 UK pension funds.
Nigel Peaple, director of policy and research at the PLSA, told Yahoo Finance UK on Thursday (18 June): “The state pension still makes up the majority of retirement pension for most people. It is currently worth £9,110 per year.
“While it is important that the state pension is affordable to government, before changing the current policy on the triple lock, it is also important that they remember the key role it plays in helping everyone have an adequate pension.”
Union leaders also hit out at any suggestion the triple lock could be scrapped altogether. “Pushing the cost of coronavirus onto pensioners is wrong. Two million UK pensioners live in poverty, and over-65s account for nine in 10 COVID-19 deaths,” tweeted the Trades Union Congress (TUC).
“Pensioners have already paid a terrible price for this pandemic. Targeting them for cuts now is cruel.”