MPs across all parties have been urged to support the scrapping of the triple lock on state pension increases, after the government refused to be drawn on its plans for the policy.
In November, the Work and Pensions select committee recommended the government to scrap the 2.5 per cent guarantee on annual state pension rises, calling it "unfair and unsustainable".
In its place, it recommended a much more complicated but less expensive "smoothed earnings linked" mechanism for calculating annual increases.
In the government's response, published today (25 January), it restated its commitment to keeping the triple lock in place until the next election.
It refused to be drawn on its plans for the policy after that. However, it pointed out that spending on pensioners was on track to fall from 6.1 per cent of GDP in 2010 to 5.6 per cent 2020, with the triple lock in place.
Responding to the government's response, chair Frank Field said the committee would "continue to press for cross-party consensus on the replacement of the triple lock after 2020".
"The government is right to say pensioner benefit spending has dipped slightly as a share of GDP, as accelerated increases in the state pension age have kicked in. But official projections show that, without reform, it will rise relentlessly from that point.
"The triple lock has been valuable but it is unsustainable. The Committee has recommended an alternative which would maintain pensioners’ living standards and protect them from the effects of inflation," he said.
According to the committee's proposed model, annual increases in the state pension could not fall below a "benchmark proportion of average earnings".
If inflation exceeded that figure, state pension increases would follow it.
However, if annual earnings exceeded both the earnings benchmark and inflation, the state pension would not follow, tracking instead the highest of the earnings benchmark or inflation.
The report did not explain how the "benchmark proportion of average earnings" would be calculated.
Steven Cameron, pensions director at Aegon, said the Work and Pensions select committee's position suggested the triple locks days were "well and truly numbered".
"While the government has made a commitment to maintain it till 2020, there are growing calls for a more affordable alternative.
"The Committee is right to point to the need for a consensus on a fair alternative which provides retirees with a sustainable level of state pension throughout their retirement but which doesn’t over burden working age tax payers, who ultimately foot the bill," he said.
The majority of industry commentators have shared this view.
One notable exception is Steve Bee, who recently told FTAdviser the policy needed to stay in place for several more years to make up for the lost years that began during the Thatcher government.
The Trades Union Congress also opposes scrapping the triple lock, for the same reason.
james.fernyhough@ft.com
