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IFS: Tory ‘double lock’ won’t make state pension more affordable

IFS: Tory ‘double lock’ won’t make state pension more affordable

by Jack Gilbert May 19, 2017 at 09:51

The Institute of Fiscal Studies (IFS) has said the Conservative plan to move from a triple lock to a double lock on the state pension will do little to improve affordability in the long-term.

Yesterday the Tories announced in their manifesto a plan to drop the triple lock from 2020 and replace it with a double lock which would see the state pension increase by earnings or inflation – whichever is highest (under the triple lock the state pension increases by 2.5% if the other two factors are lower).

However the IFS has claimed this proposal ‘does little to resolve the pressures an ageing population will put on the public finances over the years to come’.

The economic think tank estimates that keeping the triple lock in place would mean state pension spending would amount to just over 7% of the national income by 2065-66.

However, as the Tories called for, moving to a double lock would only see state pension spending 0.2% lower of national income (around £5 billion) over the same period.

Carl Emmerson, IFS deputy director, and Andrew Hood, senior research economist, said the reason for this similar spending commitment was because earnings and inflation are rarely above 2.5%.

‘Hence getting rid of the 2.5% element of the triple lock does little to change the projected long-run generosity of the state pension,’ the pair said in the report.

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Comments  (7)

  • Roger Savage: 

    OK, pensions would be easily affordable if we:

    - Slashed public sector waste

    - Slashed benefits for the 'could work, can't be bothered

    - Slashed foreign aid

    - Cancelled child benefits for children who live outside the UK

    - Cancel payments to those coming to the country that don't contribute

    - Sharply reduced pensions for civil servants and MPs

    Just a few ideas. The bottom line being - there's plenty of money in the pot, it's just wasted by the traitors and wastrels that we have tasked with forming a government (now and in the past). Give an idiot £10 and they'll waste it. Give them £100 and they'll waste that too. Sadly that's how our taxes are spent.

    Tragically, people who have paid NI and tax for years are portrayed as getting a free ride when their contribution to society has *bought* them a pension. Meanwhile, their contribution has given many others a free ride. Cruel irony.

    17:45 on 19 May 2017

  • Law Man: 

    This occurred to me. Even if the 'inflation' is the lower CPI (rather than RPI) it may be that inflation will exceed 2.5% in future years; making the abolition of the "2.5%" irrelevant. I believe the recent figure for CPI was 2.7%.

    18:00 on 19 May 2017

  • Alan Tonks: 

    Well said Roger right on the ball!!

    18:41 on 19 May 2017

  • RippedOff: 

    Roger,

    You must have forgotten: Bring back Workhouses.

    I actually agree with: reduced pensions for civil servants and MPs. Dispute, me having been a CS - the best job I ever had, but I worked hard and added more to my professional experience than the other 9/10ths of my working life.

    19:18 on 19 May 2017

  • Roger Savage: 

    @RippedOff - ah well, it's interesting isn't it. Workhouses are synonymous with a harsh, uncaring society. What are we though, as a society, when it seems OK to charge the elderly for care they've already paid for through tax and NI but we don't ask prisoners to pay the financial cost of their incarceration? Where prisoners can make dubious appeal after appeal on Legal Aid - out of the public purse, at no cost to them. Where people can rock up in the UK and engage in a bit of health tourism. What have these people paid into the pot?

    Morally this seems very much a workhouse like proposition - condemning one group to pay (their only 'crime' needing care in their old age - which has been bought and paid for) whilst allowing those who haven't positively contributed to society to get a free ride. It's round the wrong way...

    20:00 on 19 May 2017

  • mark antrobus: 

    The IFS projection will probably prove correct. This is because in most years going forward average earnings or the average prices will likely increase by at least 2.5% anyway.

    Unfortunately this means the escalating cost of state pensions will not be stopped, never mind reversed. This is a serious problem because the cost of these pensions is met by the National Insurance contributions of people in work and of working age; the combined employee and employer rate is now over 25%. Apart from the perverse effect on employment and work incentives, this creates a serious injustice; the average state pension recipient today stands to receive far more than they have ever paid into the system, whilst those who are currently paying in are most unlikely in the future to ever receive their full contributions back.

    23:03 on 19 May 2017

  • mark antrobus: 

    The IFS projection will probably prove correct. This is because in most years going forward average earnings or the average prices will likely increase by at least 2.5% anyway.

    Unfortunately this means the escalating cost of state pensions will not be stopped, never mind reversed. This is a serious problem because the cost of these pensions is met by the National Insurance contributions of people in work and of working age; the combined employee and employer rate is now over 25%. Apart from the perverse effect on employment and work incentives, this creates a serious injustice; the average state pension recipient today stands to receive far more than they have ever paid into the system, whilst those who are currently paying in are most unlikely in the future to ever receive their full contributions back.

    23:03 on 19 May 2017

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