Prime Minister David Cameron’s threat to abolish the triple lock guarantee on the state pension is not just a “scare tactic” but a genuine potential outcome of a vote to leave the European Union, industry players have warned.
Mr Cameron warned over the weekend that the triple lock, a 2010 law that guarantees state pension payments increase by the higher of annual earnings or price increases and by no less than 2.5 per cent a year, would be a likely victim of Brexit.
Writing in The Telegraph, he said the negative economic impact and increase in inflation many forecasters have predicted would make this guarantee, which was “made in expectation of a growing economy”, unaffordable.
“If we had a big black hole, we could struggle to justify this special protection any longer,” Mr Cameron said.
“Not when pensions represent a huge portion of public spending – over £90 billion this year – and when inflation is forecast to hit 4 per cent if we leave Europe.
“So here is the reality: if we leave, the pensioner benefits would be under threat, and the Triple Lock could no longer be guaranteed in the long term.”
Tom Selby, senior analyst at AJ Bell, said while Mr Cameron’s warning was an attempt to “scare old people into voting remain”, he added that it had substance to it.
“Clearly it is politically motivated. He knows that pensioners are more likely to turn out than young people,” he said.
“But clearly if he thinks the economic impact of Brexit is that the government is going to have less money to spend, then the triple lock is there to be cut. It was always a very, very generous promise.”
He added that Mr Cameron appeared to be implying that, in the event that the UK votes to remain in the EU, the government would uphold the triple lock – a policy that came from the Liberal Democrat side of the coalition government.
Alan Solomons, a financial adviser and director of Alpha Investments & Financial Planning, said that Mr Cameron’s warning was both a scare tactic and a valid concern.
“Pensioners voting for Brexit is like voting for Christmas if you are a turkey. If you’re a pensioner, the next 10 years is a significant portion of your life.
“I don’t like the EU. I don’t like how it is run. But unfortunately we’re not parked next to the US, we’re parked next to Europe, and we have to trade with them.”
However, he said the triple lock was “totally unaffordable”, and in the long-term was destined to be abolished whatever the outcome of the referendum.
“Whoever introduced the triple lock was clearly a politician, because anyone else doing that would be in a sanatorium,” he said, adding: “Burning up money for votes should be a treasonable offence.”