Protect The Triple Lock

Jon Trickett MP writes:

Andy Burnham is right to say that Britain needs a serious conversation about how we support people in old age. His proposal for a National Care Service, to provide free personal care, is welcome. But changing the Triple Lock to help pay for it risks creating a false choice between two essential pillars of a decent society.

The Triple Lock was introduced in 2011 after decades in which the State Pension had fallen badly behind average earnings. Under the system, pensions rise each year by whichever is highest: inflation, average earnings growth, or 2.5 percent. This has provided important protection against both rising prices and the long-term erosion of pensioners’ living standards.

That protection still matters. Age UK estimates that 1.7 to 2.1 million older people are living in poverty, while more than 3.4 million — 28 percent — report that they are struggling financially. Nearly half of those struggling have been doing so for three years or more.

Nor is Britain unusually generous by European standards. The OECD estimates a net pension replacement rate of 44.7 percent for an average UK earner, compared with 54.5 percent across the EU27. The figures are substantially higher in countries including Spain, Portugal and Sweden. Pension systems differ, of course, but Britain hardly has an extravagant state pension by any standard.

This is fundamentally a debate about inequality, although you wouldn’t know it from the headlines. In England, healthy life expectancy in the most deprived areas is just 49.8 years for men and 48.2 years for women, compared with 69.2 and 68.5 years in the least deprived areas. Since 2019–21, healthy life expectancy has fallen in the most deprived areas.

Behind those statistics are people who have spent their lives in low-paid and physically demanding work, often in poorer housing and with worse health. They are not simply dying sooner; many are also reaching later life with greater needs and fewer resources.

These are the generations who lived through the war and helped rebuild Britain in its wake. They contributed to the society from which all of us have benefited. To treat them as a convenient source of savings, as the government is now proposing, is to deny them the dignity and security they deserve.

There is much to agree with in the proposed National Care Service. The principle is a straightforward social democratic one: if someone becomes frail or needs help in their daily life, access to care should not depend on their savings or whether they own their home. Britain is one of the richest countries in the world. We can afford this without a raid on the elderly.

The current £84 billion tax relief on pension payments is heavily skewed towards those with higher incomes. The more you earn, the more relief you receive, and so the bigger your pension. Even more striking is that the rich can shelter assets in their pension funds which can grow substantially over a working lifetime, with no need to pay capital gains tax on them. The pensions setup in the UK is nothing less than a scam by the rich. Why not help pay for the National Care Service by correcting this grossly unfair distribution? 

The NHS does not tell cancer patients that they must first spend their life savings before receiving treatment. It pools risk and provides care according to need. So let’s do the same with care, making it a right rather than a commodity. We don’t have to set the young against the old or taxpayers against pensioners. These zero-sum decisions are the stuff of the neoliberal economics that Burnham claims to oppose. A decent pension and free personal care are both possible with a progressive tax system. The left must push the government to build one.

And Nic Cicutti tweets:

Ex-personal finance writer here. For the past few weeks, we’ve a well-seeded, relentless government spin operation AGAINST the triple lock mechanism. Some of it has involved seeming “left-wing” commentators. In this (long) thread, I’m going to argue FOR the triple lock. Andy Burnham announced yesterday plans to end the triple lock to pay for a national care service. From 2030 Labour will scrap the earnings element, applying it “periodically” – but with no guaranteed commitment. It robs Peter to pay Paul. And it punishes pensioners.

Declaration of interest: I’m a former personal finance editor at The Indie and the FT. I’ve covered pensions issues for almost 35 years. And I benefit from a full state pension, as well as occupational schemes. As a Green socialist, I believe decent pensions are a human right. At about 43% of the average UK income, the state pension is already one of the lowest in Europe by income replacement rates. In Germany, for example, the income replacement rate is 55%, Canada is also 55%. In France, it’s 50% of a worker's average salary. In Italy, it’s 83%. The UK is 11th among EU countries for its retirement age – which is increasing to 67 by 2028 and 68 by 2044. The older you stop work at, the less time you have in actual retirement, even if you can afford it.

In any event, we’re not living longer. The UK has fallen behind the EU average and ranks near the bottom for life expectancy at 80.9 years, compared with 81.5 years in Europe. Switzerland, Italy, and Spain have life expectancies between from 84 to 86. We live less in the UK. As significant, “healthy life expectancy” - the average number of years a person can expect to live in good health – has fallen by 2 years in the past decade, to 60.7 years for males and 60.9 for women. The UK has the second steepest decline among 21 countries worldwide. Healthy life expectancy is a CLASS ISSUE. It’s highest in Richmond-upon-Thames at 69.3 years for males and 70.3 years for females in 2022–24 and lowest in Blackpool for males (50.9 years) and Hartlepool for females (51.2 years). Live less, enjoy life less, receive less money.

Most of us know the triple lock guarantees the state pension rises each April by the higher of earnings, inflation or 2.5%. We also know why it was introduced in 2011. It was both a Tory bribe & a recognition that pensioners’ incomes had fallen too far in the previous 15 years. Let’s be clear: this was caused by Tory policies in the 1980s. Thatcher’s 1980 Social Security Act uncoupled annual pension increases from average workers’ earnings. The result was the State Pension steadily lost ground against wages during this period. Labour failed to address the issue. In relative terms, the value of the UK State Pension fell by 11%, from 18% of average earnings in 1996 to roughly 16% by 2011. The Pensions Act 2007 planned to re-link increases with earnings growth. But Labour lost the 2010 GE.

It’s important to understand some of the drivers of that loss: in the 1997 UK general election, voters aged 65+ supported Labour at almost 40%, with Labour performing pretty evenly across all age groups. In the 2010 general election, 31% just of older voters voted Labour. For reference, the standard income from a DC pension is calculated at 4% of the total pot. So a £35k pot buys an annual income of £1,350 a year – before 20% tax, so 20 quid a week. An £8k pot buys you a whopping £320 additional pension a year – before tax, of course. The lowest 5 income deciles of the UK population hold less than 1% of all private pension wealth. For individuals in the bottom 3 deciles, the median pension wealth is £0. If you’re poor you can’t afford to save as much as a rich person. So your pension will be far less.

What about defined benefit (DB) occupational schemes, particularly public sector ones linked to years of service, ones that have disappeared from the private sector? Isn’t there a huge group of cosseted employees who benefit disproportionately from those occupational schemes? Ignore the fact that public sector workers contribute up to 13% of salary into their schemes, that pensions form part of contracts negotiated by unions on behalf of staff and we should always oppose a race to the bottom when it comes to working conditions for anyone. The average length of service in public sector is about 12-13 years, slightly more in the civil service, less in the NHS, local government and teaching. The median public sector annual pension at retirement is worth about £8k - before tax at 20%. Which means 50% of retirees will receive less, some a lot less, than this amount - and in that cohort are millions of part-time workers and those in lower grades. Women. Again. The figure also ignores “opt-outs” whose low pay and family needs means they can’t afford to contribute into their public sector schemes. The number is about 10% & rising sharply, especially among younger staff: 70% of NHS and 67.5% of teacher opt-outs are workers under 40.

What about home ownership & older people not paying down mortgages? Up to 1.7m pensioner households pay rent & do not own their homes. This is about 21% of retirees. The Pensions Policy Institute (PPI) estimates that by 2044, up to 1 in 3 pensioner households will be renters. But those who actually own their homes are OK, aren’t they? Nope. Bank of England and FCA data shows that 42% of all new mortgages run beyond the borrower's 67th birthday (up from 27% in 2019). This number is increasing every year. I’m one of those people. And, unsurprisingly, this affects savings. Savers who anticipate having ongoing housing costs in retirement hold an average pension pot of just £35k. What we have is inequality baked into the system, with working class people and women in particular paying the price.

Even in those terms, any attempt to reform the pensions system might look at the £83bn in tax reliefs for pension contributions, as well as NIC write-offs and income tax foregone on withdrawals. 57% of this is shared by people who are on 40% tax rate, 14% for those on 45%. The rest (29%) goes to the tens of millions of people who are on 20% tax rate and are trying to save into a defined contribution pension – yet benefit the least from the tidal wave of tax relief available to the richest in our society. Imagine what that money could do if it were redistributed among all pensioners, so that reliefs are capped for everyone at 20%. In fact, you don’t need to imagine. A report in 2024 found it would free up £15bn a year. That’s the equivalent of £21.50 a week for every pensioner in the UK.

Far from being the triple lock being unaffordable, the money is there even if you wanted to hypothecate existing tax reliefs. Never mind raising the money in the many other ways suggested by socialists. Like raising IHT tax rates to 50%, abolishing all the reliefs and dropping the nil rate band to £250,000, which would raise another £4bn. Or taxing wealth for 22,000 just 2% on wealth above £10m, which would raise £25bn a year. Yet that’s not what Andy Burnham wants to do.

I’ll finish by saying that what concerns me is the divisive side effect of the “intergenerational fairness” argument, which is starting to turn people against each other. I’m seeing younger self-professed lefties blaming “boomers” not capitalism for what’s happening. They point at voting patterns among the over 65s to “prove” older people are not just “privileged” but irrevocably right-wing. The fact that until the 1980s voting patterns of over-65s broadly (though not universally) reflected younger age cohorts, has been memory-holed. As have the reasons for the changes since then: the decline in trade union organisation particularly after the Miners’ Strike, the atomisation of the working class and the loss of “community” in many parts of the country. In the absence of a strong organised working class, the underlying sense from some is one of score-settling, rather than a genuinely socialist agenda, which would see young & old agreeing on policies within which people of all ages would be treated with dignity & respect.

What Burnham has done, with his band of reformist fellow-travellers around him, has been to legitimise the argument for scrapping the triple lock. Whichever party wins the next election it means other partes will use the cover he provided by getting rid of it themselves. Burnham has made it easier for us to recognise him as the sell-out he is. I didn’t vote for him in 2015 and I’m now out of the Labour Party. It falls on us to argue against the politics of despair, against ageism & for a better life for all, including pensioners.