Around 700,000 more pensioners could be living in poverty in 2050 if the pensions triple lock is scrapped, a new report has revealed.
According to a new report, How would removal of the state pension triple lock affect adequacy?, by the Pensions Policy Institute, the removal of the triple lock policy on the state pension could result in almost 3.5 million older people in poverty in 2050, in comparison to 2.8 million pensioners if the policy remains.
The Trades Union Congress, Age UK and Centre for Ageing Better have highlighted that scrapping the triple lock would negatively affect the pensions of the poorest and the young. Without the triple lock, low-paid young earners would have to put in an additional £540 a year to avoid poverty in retirement; or double the amount they would need to contribute now.
In addition, women would be impacted by this change. While women currently make up almost two thirds of those in poverty aged over 65, the weekly pension income of a low paid-women would drop by 7 per cent, on average, if the triple lock was abolished.
For mid-earners, the removal of the triple lock would reduce pensioner income by 5 per cent, £1,000 a year and reduce the income of the poorest pensioners by 7 per cent, £800 a year.
TUC General Secretary Frances O'Grady highlighted that while the UK already offers the least generous state pension in the developed world, “getting rid of the triple lock would increase pensioner poverty and hit the poorest hardest”.
Age UK charity director Caroline Abrahams said that the analysis emphasises the importance of the triple lock to protect from growing pensioner poverty and “enable low income workers to save enough for a decent retirement income whilst helping to protect the income of those already retired.”
Nonetheless, while the triple lock can work to protect the income of these groups, the main argument for its removal has been attributed to its increasing cost. The report highlights that the triple lock is expected to gradually increase above the level of both prices and earning and resultantly cause the cost to also rise. According to the Office for Budget Responsibility, the state pension expenditure under the triple lock is set to cost 7.06 per cent of GDP per year by 2066/67, equivalent to around £144bn of today’s GDP.
Contrastingly, although the average state pension is just over £7,000 a year, “millions of older people are heavily reliant on this relatively modest sum, a situation that is set to continue for the foreseeable future…Considering the UK's high poverty levels, the triple lock looks to be an increasingly important mechanism to provide a degree of financial security for current and future generations of older people,” Abrahams added.
Centre for Ageing Better director of evidence Claire Turner also added: “This report shows the importance of uprating pensions to ensure fewer people will live their lives in poverty now and in the future. It also serves as a wake-up call for anyone assuming the state pension will provide a comfortable income in retirement. Such people will find themselves much less well off than anticipated.”
Subscribe to our newsletter to receive breaking news by email.