- On 13 October 2021, the second reading of the Social Security (Up-rating of Benefits) Bill is scheduled to take place in the House of Lords.
- There are over 2 million pensioners in poverty and inflation has been soaring.
- An adjusted earnings figure lower than 8.3%, could be used to keep the triple lock, says pensions expert.
- If pensions rise by just 3.1%, there will be increasing pensioner poverty and MPs likely to face angry pensioners who “feel abandoned” while their household bills are soaring.
- State Pensions are still below 1979 levels: In 1979, the Basic State Pension was worth over 26% of average earnings. In 2020, after many years of the triple lock, the basic State Pension (£137.60 a week) was only 19% of average earnings.
- MPs were “misinformed” about earnings link.
“Chancellors have too often eyed State Pensions as a tempting target to raid when they need to find large sums of money”, says former pensions minister Baroness Ros Altman, who runs a blog on pensions and savings.
The pensions expert, who has studied pension poverty since the 1970s, says the latest raid on pension pots is running against the basic principles of the UK’s social welfare system.
This should not be about money – it is about people and the social welfare system. It is about trust in politicians’ promises. It is about millions of people who are often out of sight but struggling in 21st Century Britain on the lowest state pension in the developed world.Baroness Ros Altman
She argues that the latest tax raid tactics will short-change the elderly to fund reductions in alcohol duty and bank taxation.
“What does this say about our country’s values? Surely we can do better than this. A decent society has a duty to look after its elderly citizens. Especially after being elected with a clear mandate to do so,” says Baroness Altman.
Altman also points out a fact that many people seem to be unaware of and that is that the Pension Credit has never been part of the triple lock. “It was always protected to rise in line with average earnings,” she says.
The Government wants to sweep that protection away this year, but this would set a dangerous precedent and would increase the numbers of pensioners struggling to make ends meet. Having studied pensioner poverty since the 1970s, I am convinced that dropping the earnings protection, even supposedly for just one year, sets a very dangerous precedent. Pensioners should not be left without the earnings protection they were told they could rely on.
Don’t abandon the earnings link
In a matter of days, MPs will debate the State Pension uprating Bill again when they consider the cross-party Lords amendments on protecting the triple lock earnings link.
Rather than abandoning the earnings link altogether, Alman believes that MPs should consider adjusting the usual Average Weekly Earnings statistics produced by the ONS, which showed an increase of 8.3%. These by Altman’s accounts were inflated by last year’s labour market interventions, such as furlough.
She believes the underlying increase would be less than this, so it “can be appropriate to adjust for the pandemic, but not to abandon the earnings link altogether.”
Amendments allow for flexibility and adjustments
She stresses that the Lords amendments expressly allow for adjustments, while protecting the triple lock commitment.
She suggests that even if they would abandon the earnings protection for just one year, history could repeat itself in the years to come making State Pensions a “valid target to raid when Government wants to find money.”
On her website, she writes that “MPs were misinformed”:
“When asking MPs to agree to abandoning the earnings link, the Minister opening the Commons debate on 20 September said: ‘This Bill will ensure that a temporary statistical anomaly in wages does not unfairly track across into pensions, while also preserving the spending power of pensioners and protecting them from increases in the cost of living.’ And, summing up at the end, the Minister said the so-called ‘double lock’ of cpi or 2.5% ‘will ensure that pensioners’ spending power is preserved and that they are protected from the higher cost of living.’ “
The pensions expert says most people think that MPs will just reject these amendments and vote again to make pensioners worse off in real terms next year.
“I believe there is still a chance that, with sufficient pressure, the Government may realise its plans are unsound,” says Baroness Altman.
The government has a social contract to look after pensioners
The pensions expert sees looking after pensioners as part of the “social contract” that government has with its citizens. Breaking that contract, according to her, goes against the values society considers important.
“It is also about trust and integrity, which is why we needed to make a stand about a policy decision that was made by MPs on the basis of misleading or flawed information,” she says.
Age UK has also called on the Government to review the policy, stating that pensioners would be worried about the future of the triple lock and that more measures were needed to ensure pensioners could live comfortably in retirement, the House of Lords has reported. The Pensions Policy Institute accepted that the 8% earnings increase put the Government in a “tricky position”, but suggested it consider earnings over the last two years instead. However, The Institute for Government has backed the temporary measure, believing it offers a “reasonable outcome” in light of public finances.
Despite the flaws that Baroness Altman sees in the pension credit soon being abandoned, she did have some good things to say about the Chancellor’s decision to fix pension tax relief rules for the lowest earners, which meant around 2 million workers were losing out on tax relief.
According to the former pensions minister, more than a million low-earning women are currently paying 25% extra for their pension due to a tax administration anomaly in Net Pay schemes. The Chancellor has proposed to change HMRC systems to ensure they will get their tax relief and higher take-home pay – but not till 2025.