Replace the pensions triple lock with a new wages index

As the UK's economic crisis mounts, ministers are searching desperately for budgets they can cut. They should start by ensuring the state pension rises only as fast as average wages, writes Jack Rowlett.

Since 2010 the so-called "triple lock" has ensured this benefit increases by whichever is highest of inflation, average wages, or 2.5 per cent. A decade of stagnant pay growth has meant the increase in the state pension has matched the rate of average earnings in only three of the 12 tax years since the triple lock was introduced. This has widened a large and unsustainable gap in wealth between workers and pensioners.

To help balance the books and solve the underlying problem of age-based inequality in the UK, we should link the state pension to the wage conditions the rest of us are experiencing.

As a country we appear to have a collective hangover from the time when pensioners genuinely were an impoverished group. In the 1980s, rates of pensioner poverty were as high as 45 per cent. Fast forward to today, however, and one in four of them are millionaires. Meanwhile, for the first time in history the average weekly pay of a pensioner is higher than that of an average worker, a differential of £20. All the while the working age population are forced to pay ever higher taxes to fund benefits for the swelling ranks of retirees. The reality is that in 2022 many older citizens simply don't need a gold-plated handout like the triple lock.

Pensioners – who are overwhelmingly better off than workers – can and should bear more of the burden.

The policy becomes even more problematic when you look at the cost to the Exchequer. Last year, after a decade of the triple lock, the state pension bill was £5.6 billion higher than it would have been had it been linked to wages. This year the government intervened, capping the increase in state pensions at 3.1 per cent due to distortions in earnings calculations after the end of furlough. If they don't permanently abolish the policy then pensioners will take home an inflation busting handout of more than £10,000 next year at an even greater cost to taxpayers.

This country's spending is out of control, and we urgently need to rein it in. Pensioners – who are overwhelmingly better off than workers – can and should bear more of the burden. By ending the triple lock and linking the state pension to wage growth we can continue to provide retirees with a safety net whilst also asking the richest group in society to make a bigger sacrifice than younger people on lower incomes.

Low growth has 'hampered ordinary working families'

The problem with the triple lock isn't just the cost though. It also tampers with the incentives at play in our politics and society. More than a decade of low economic growth has hampered ordinary working people and their families and damaged young people's prospects. But the triple lock has insulated pensioners from the miserable economy the rest of us have been experiencing. Consequently they – the largest demographic in society – vote for politicians that protect their handouts without putting in place the growth-inducing framework the rest of us so dearly need. A pension that rises with wages would mean that pensioners would be as invested in economic growth as workers, and would vote accordingly.

If this policy were politically easy, it would have been done by now. Recipients of the state pension often claim that it's an entitlement. The triple lock, so they say, is their reward for paying into the system all their lives. But the state pension isn't an entitlement – it's a benefit. When current retirees were young, they were paying for the pensioners of their day to collect their own handouts. Today working people are doing exactly the same thing, only there are far more older Brits now, and they have a much greater hold on the country's wealth and crucial assets like housing. We simply cannot afford to allow today's strivers to foot the bill for baby boomers' retirements.

Ending triple lock will 'increase the opportunity for workers'

As much as retirees are wedded to the triple lock, they also have the natural instinct to want better futures for their children and grandchildren. The loss of this inflation-busting benefit is not an attack on pensioners, but a way of increasing opportunity for workers and balancing the books fairly. When the economy grows, we all benefit. And none of this is to suggest that pensioners that are in desperate need shouldn't benefit from support from the state – they should! But because they are poor, not because of their age.

Linking the state pension to average wage growth balances our collective needs. It would be a fairer deal for workers, it would help all age groups to push in the same direction, and it would save the government money at a time when cutbacks are so desperately required. The argument is clear, and this time of acute economic crisis is the best moment for our politicians to make it. Ending the triple locked pension would be a stunning act of political bravery – keeping it was a 2019 Conservative manifesto commitment. But if our new Prime Minister Rishi Sunak and Chancellor Jeremy Hunt are really serious about improving the prospects for the next generation, they should end the triple lock madness now.

Jack Rowlett is a political commentator with Young Voices UK. He writes for Reaction, 1828, and Adamah Media and makes regular appearances on Times Radio and TalkTV.