The Institute for Fiscal Studies (IFS), a think tank, has issued a report suggesting that it would be fairer to the whole population for State Pensions to be linked to wages inflation.
Current Triple Lock
State pensions increase at the higher of wages inflation, CPI inflation and 2.5%pa. It is thought this is now unfair on the rest of the population with pensioners getting the best of ‘both worlds’ by being protected when wage rises were slow but cost of living prices increased and now that wages are increasing at a faster rate as consumer price inflation falls, pensioners are getting yet another boost.
This is perhaps unfair on workers that pay the national insurance contributions today that pay an ever increasing state pensions burden and pensioners are not feeling ‘the pinch’ in the same way.
The IFS argues that the State Pension was designed to offer pensioners a % of earnings in retirement and that by offering CPI linked increases too, pensioners are getting the ‘best of both worlds’ and it should return to a target level of a proportion of the average median wage.
This is a tough one. There are two many people that simply did not pay anything into the National Insurance system or did not pay enough to get enough credits towards and full state pension but still benefit from the state pension and pension credits. Equally, there will be many that did and feel that the state pension offers poor value compared to the NICs they paid.
For too long, in fact since the late 1900s when state pensions started, successive governments have ignored the fact that we are an ageing population and we all need to pay more NICs as less workers are around to pay for more pensioners and then to offer a ‘triple lock’, whilst desirable and beneficial to our elderly, it is unsustainable and certainly mot fair that when workers are not getting pay rises but the cost of living goes up, they are suffering whereas those on state pensions get the benefit of the larger of either increasing.
We welcome the discussion point raised but suggest state pensions will continue to be more of an electoral vote chaser i.e., an ever increasing proportion of voters are pensioners, so any political party will play the vote chasing game rather than making sound, financial decisions.