A triple lock protecting the value of the state pension will remain until at least 2020, the pensions minister has said, despite the rising cost to younger generations.
The work and pensions select committee met Ros Altmann and two other Department for Work and Pensions representatives this morning (27 April) to discuss state pension policy, with MPs grilling her on the ‘intergenerational contract’ between those receiving and paying for pensions.
Baroness Altmann tackled perceived income imbalances between those in work and in retirement, saying the government was trying to get pensioners back to a level that does not leave them in poverty.
“It isn’t appropriate to think pensioners incomes should not be protected”, she said.
Baroness Altmann also tackled the “myth” all pensioners are well off, suggesting this was accurate probably only for the top 20 per cent.
MPs questioned the level of welfare spending dedicated to maintaining the triple lock guarantee - which sees payments guaranteed to increase in line with whichever is the highest of earnings, inflation or 2.5 per cent.
The pension minister admitted the proportion spent would increase in-line with the increasing pensioner population.
“That’s all planned and budgeted for in the reforms we’ve already made,” Ms Altmann said, adding she “hopes the intergenerational contract will not be interfered with.”
The Office for Budget Responsibility previously stated estimates for the cost of the triple lock were £0.4bn in 2014/15, but because of higher inflation and lower earnings it has ended up costing £2.9bn.
Heidi Allen, a Conservative MP for South Cambridgeshire, asked how long the policy would last, given rising levels of inflation, to which Ms Altmann said: “There is no doubt we are committed to the triple lock until 2020, but policy thereafter is up to a future government“.
Conservative MP for Gloucester Richard Graham asked whether there was cross-party discussion about what might happen after 2020, to which she added that those discussions are going on already and welcomed the committee’s scrutiny.
Last month, Mr Graham asked former pensions minister Steve Webb whether the 2.5 per cent element of the triple lock should be linked to something else, given the near-zero inflation.
The now director of policy at Royal London said: “If you have had 30 years of decline in the value of the state pension from 1980 to 2010 my worry actually is that recovering the value through the triple lock was going to be glacial so in a way a decent rise, getting things moving quickly, was a windfall to get to the policy outcome that we needed.”
As expected, Ms Altmann did not respond to repeated questioning from Scottish National Party MP for Paisley and Renfrewshire South Mhairi Black around the issue of women’s state pensions.
peter.walker@ft.com
