“The Conservatives have taken a bold step in committing to replace the triple lock. The main issue with the triple lock is that it guarantees the state pension will rise by 2.5% no matter what. The double lock removes this ratchet effect however, the state pension will still rise faster than both earnings and prices in the long run, because of inflation, according to projections from the Office for Budget Responsibility
“If the government really want to ensure the social contract between generations remains intact, which they dedicated an entire chapter to, they will need to take a tougher stance on this political hot potato.
“The Conservatives should have heeded the recommendation of a ‘smoothed earnings link’ from the Work and Pensions Select Committee. This means growth in pensions continues, but when earnings fall behind price inflation, an above earnings increase could kick in until either earnings growth resumes or for as long as the pension remains above a previously established limit compared to average earnings. When this happens it would revert to earnings.
“This would ensure that the state pension rises in line with earnings rather than faster than earnings, but also protects pensioners when earnings fall.
“The debate about the state pension is a question of who pays and how much. We operate under a ‘pay as you go system,’ so instead of saving for your own state pension, you fund the pensions of current pensioners. This means the more generous the terms, the greater the funding required from current workers.
“The IFS has revealed that pensioners have seen their average income grow nearly 15 percent since 2007/08 thanks to the triple lock. Meanwhile, young adults have only just started to recover median income levels last seen before the recession. The future affordability of the state pension will not be eased by a double lock and that fact is likely to exacerbate the growing issue of intergenerational inequality.”