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Triple-Lock Pension:doubts Grow Over ‘Totemic’ Cash Pledge To Pensioners

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Guardian: https://www.theguardian.com/money/2016/jul/30/state-pension-triple-clock-doubts

The triple-lock protection for state pensions should be dropped to save billions of pounds for better causes, according to the outgoing pensions minister. The Department for Work and Pensions declined to rule out a review of the totemic policy in the coming months.

Scrap triple lock that protects state pensions, says thinktank chief

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Under the triple-lock guarantee, pensions have risen every year since 2010 by whichever is the higher figure the rate of inflation, average earnings or a minimum of 2.5%. This has lifted many pensioners out of poverty, but Baroness Altmann, who left her post as pensions minister this month, said the cost beyond 2020 would be enormous.

In an interview with the Observer, she said the billions of pounds of spending it entailed could be better used, following a period in which pensioners have enjoyed swiftly rising living standards relative to the rest of society.

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Altmann also revealed that she had privately lobbied David Cameron a year ago to drop the commitment of hiking pensions year-on-year by 2.5% when earnings and price inflation are low, but that the then prime minister had blocked the change on political grounds.

The Tory peer added that she believed the abandonment of the policy is possible now Theresa May is in Downing Street. The prime ministers chief of staff, Nick Timothy, has previously written that the triple lock was an obvious policy to dispense with in order to redistribute welfare cash to help the low paid.

Edited by Fairyland

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I have yet to hear anyone defend the 'triple lock', and I know quite a few pensioners. Let's hope for something in Hammond's first budget.

But for the foreseeable future, money 'saved' shouldn't be going into any Guardianista champagne redistribution. Just contributing towards balancing the books.

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Good. It was a stupid pledge from the days when 2.5% inflation was a reasonable worst case.

For the past few years they've been getting at least 2.5% when everyone else has been getting 0%.

Just increase with average salaries or inflation. Forget the 2.5% minimum.

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It was a bribe, along with pensioner bonds, for my generation to vote for Cameron and it worked for a while, some people are easily bought.

Do we know if your generation did vote disproportionately for Cameron, compared to long-term averages? Cameron won in 2015 because everyone else (in England) self-destructed.

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It was a bribe, along with pensioner bonds, for my generation to vote for Cameron and it worked for a while, some people are easily bought.

It was a bribeto match Browns bribes.

Coal and Cons carried on p1ssing money away a la Broon.

Looking at Hinckley it appears there might be someone with a calculator inGov now. And knows there's no rich Dad to bail UK out.

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In the interview she mentioned deflation e.g. in Japan and how the triple lock would operate. Bizarre statements really as the Bank of England have an inflation target so she's also saying they'll fail too? I guess she's going down the Vince Cable route and fancied throwing a hand grenade in on her way out.

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What is amusing about this is that inflation may well exceed the 2.5% limit within the next two years. Service inflation is already well over 2% (in fact it's 2.8% IIRC) and the effect of the oil price fall is about to drop out of the indices and this will mean that the goods component will go up as well. This is likely to mean that inflation could escalate quite quickly over the next two years and render the main plank of the triple lock redundant. It wouldn't surprise me if we didn't get state pension increases of more than 3% within the next two years.

Too late.

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Why stop with the triple lock?

Surely the time has come to means test the state pension, given that there are plenty of better-off pensioners who regard the state pension as little more than a "cruise upgrade voucher".

The argument is often made that means testing pensions would deter people from making a contribution towards their own pension provision. It's a valid concern. But a well structured, tapered approach would be fully capable of dealing with that concern, after all, income tax doesn't deter most people from working.

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What is amusing about this is that inflation may well exceed the 2.5% limit within the next two years. Service inflation is already well over 2% (in fact it's 2.8% IIRC) and the effect of the oil price fall is about to drop out of the indices and this will mean that the goods component will go up as well. This is likely to mean that inflation could escalate quite quickly over the next two years and render the main plank of the triple lock redundant. It wouldn't surprise me if we didn't get state pension increases of more than 3% within the next two years.

Too late.

Agree. But even though I expect inflation to spike in 2016 and 2017 I suspect the longer term outlook is that it will quickly fall back down again.

This is probably a very astute moment to change from a triple lock to a double lock, as the government can smuggle this through under the cover of temporarily higher inflation and it will be done and dusted by the time the true impact is again revealed.

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Agree. But even though I expect inflation to spike in 2016 and 2017 I suspect the longer term outlook is that it will quickly fall back down again.

This is probably a very astute moment to change from a triple lock to a double lock, as the government can smuggle this through under the cover of temporarily higher inflation and it will be done and dusted by the time the true impact is again revealed.

Hmm with all that QE money sloshing about the system you may be right but could be wrong. The undercurrent may be deflationary but it wouldn't surprise me if we didn't get very high, if not, hyper inflation in the next few years. I wouldn't take a bet on it.

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Why stop with the triple lock?

Surely the time has come to means test the state pension, given that there are plenty of better-off pensioners who regard the state pension as little more than a "cruise upgrade voucher".

The argument is often made that means testing pensions would deter people from making a contribution towards their own pension provision. It's a valid concern. But a well structured, tapered approach would be fully capable of dealing with that concern, after all, income tax doesn't deter most people from working.

Means test it? That's hardly fair on me (37yr old) with 20 years contributions. I've saved 14% in a private pension but live in a 2 bedroom house (luckily bought in 1999), where my twin brother bought a 4 bedroom house for 1/4 million and doesn't have a private pension (true story) - he gets new 4 bed house and state pension while I live smaller on my own savings! Doubly punished!

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We have one of the worst state pensions in the developed world. IMO this will help drag us up to a level on par with the rest of the world. Keep as is now.

Wrong.

The basic state pension is very generous. Chuck in Browns bribes and you can see why pensioner household have higher disposable income than working households.

Find another developed country where that is true.

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Means test it? That's hardly fair on me (37yr old) with 20 years contributions. I've saved 14% in a private pension but live in a 2 bedroom house (luckily bought in 1999), where my twin brother bought a 4 bedroom house for 1/4 million and doesn't have a private pension (true story) - he gets new 4 bed house and state pension while I live smaller on my own savings! Doubly punished!

That's exactly what means-testing is all about. Punishing the prudent. Someone ten or twenty years older than you would be correspondingly more punished - or rewarded for having spent it all.

Except it's far worse than that. It adds a massive layer of bureaucracy, cheating, corruption, suspicion, red herrings, daily wail stories, etc.

[edit to add] Of course, pensions are also taxed, albeit at a lower rate than earned income. The richest person I know has pensions (from a lifetime in the public sector) that put his rate at 40%. And I daresay the likes of Sir Fred are at 45%, at least before whatever avoidance he may use.

Edited by porca misèria

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Another stupid short termist idea like unlimited immigration dreamed up by the Establishment. The outcome of both, by the laws of compounding, 200,000,000 population and every pensioner a millionaire by the year 2116. Totally unsustainable

Edited by crashmonitor

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Another stupid short termist idea like unlimited immigration dreamed up by the Establishment. The outcome of both, by the laws of compounding, 200,000,000 population and every pensioner a millionaire by the year 2116. Totally unsustainable

No they both Brown and Blair.

The establishment, as much as it exists, doesn't p1ss money away.

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Another stupid short termist idea like unlimited immigration dreamed up by the Establishment. The outcome of both, by the laws of compounding, 200,000,000 population and every pensioner a millionaire by the year 2116. Totally unsustainable

No doubt also designed as a political hot potato. The Champagne Socialists gave Mrs T. a hard time over abolishing the double-lock that was then in force and replacing it with simple indexing.

This time it probably is different, in that there are fewer old-fashioned lefties and more people numerate enough to see it for the nonsense it is.

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Hmm with all that QE money sloshing about the system you may be right but could be wrong. The undercurrent may be deflationary but it wouldn't surprise me if we didn't get very high, if not, hyper inflation in the next few years. I wouldn't take a bet on it.

Who knows what the future will bring? But for what it's worth a great many people have taken a bet on it, the market expectations are for any inflationary spike to be temporary and for inflation to quickly subside.

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That's exactly what means-testing is all about. Punishing the prudent. Someone ten or twenty years older than you would be correspondingly more punished - or rewarded for having spent it all.

Except it's far worse than that. It adds a massive layer of bureaucracy, cheating, corruption, suspicion, red herrings, daily wail stories, etc.

[edit to add] Of course, pensions are also taxed, albeit at a lower rate than earned income. The richest person I know has pensions (from a lifetime in the public sector) that put his rate at 40%. And I daresay the likes of Sir Fred are at 45%, at least before whatever avoidance he may use.

The old age pension is an obligation conferred to citizens based on National Insurance contributions. Whether you haven't got a pot to piss in, or whether you're a millionaire - you've paid into the system, so it's only fair you get what's due to you. That is the whole point of having a contributory retirement system. Also, you have to remember that the pension is taxable income, so the state ends up clawing some of it back anyway.

Edited by NuBrit

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The old age pension is an obligation conferred to citizens based on National Insurance contributions. Whether you haven't got a pot to piss in, or whether you're a millionaire - you've paid into the system, so it's only fair you get what's due to you. That is the whole point of having a contributory retirement system. Also, you have to remember that the pension is taxable income, so the state ends up clawing some of it back anyway.

Theres a large growing percentage who hsvd paid fckall in N. That's one if the major problemd with UK benefits.

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