Some 700,000 more pensioners will be living in poverty by 2050 if the pensions triple lock is scrapped, according to research from the Pensions Policy Institute (PPI).
Under the current triple lock system, the state pension increases each year in line with whichever is the highest: consumer price inflation (CPI), average earnings growth or 2.5 per cent.
Making changes how increases in the state pension are calculated could lead to nearly 3.5 million older people facing poverty in 2050, if only linked to average earnings, compared to 2.8 million if the triple lock remains in place, the analysis sponsored by the Trades Union Congress (TUC), Age UK and Centre for Ageing Better showed.
This year, the state pension will go up in line with consumer price inflation, which hit 3 per cent in September.
In its manifesto for last year’s snap election, the Conservative party proposed scrapping the 2.5 per cent lower limit after 2020.
But following the election results, the government was forced to abandon this idea in order to secure parliamentary support from Northern Ireland’s DUP, which disappointed the pensions industry.
Scrapping the triple lock would force low earners to put an extra £540 a year into their pension to avoid hardship in retirement, the report said.
Low-paid young people would be the most affected, since it would double the amount these workers need to save to avoid poverty in old age.
Women would also be affected, since they currently account for nearly two-thirds of those in poverty over the age 65.
The weekly retirement income of a low-paid woman would drop by 7 per cent, on average, if the triple lock was abolished, the research showed.
Frances O’Grady, TUC’s general secretary, argued that the “UK already has the least generous state pension in the developed world”.
She said: “Today’s report shows that scrapping the lock will hurt young and old alike. A race to the bottom on pensions helps no-one.”
According to Caroline Abrahams, Age UK’s charity director, PPI’s research “shows just how important the triple lock will be in reducing pensioner poverty in the future, enabling low income workers to save enough for a decent retirement income whilst helping to protect the income of those already retired”.
Claire Turner, director of evidence at the Centre for Ageing Better, argued that “financial security is incredibly important for a good later life”.
She said: “If you rely only on the state pension any reduction in your weekly income is going to hit hard.
“This report shows the importance of uprating pensions to ensure fewer people will live their lives in poverty now and in the future.”
However Nathan Long, senior pensions analyst at Hargreaves Lansdown, said the triple lock "should not be used indefinitely, as it is ultimately being paid for by younger workers, many of whom are doubtful they will receive a state pension at all".
“There is a separate question as to whether the state pension is sufficient, if it isn’t it may have to be increased.
“However a rise in state pension is likely to lead to it starting later which heaps more responsibility on employers to enable more flexible working patterns for older workers.”
maria.espadinha@ft.com
