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Focus on pensions triple lock too narrow, says expert

Recent discussions of the 'triple lock' on the UK state pension show confusion over how pension provision should be managed, an expert has said.   03 Aug 2016

The government said this week that it will keep the Conservative Party manifesto pledge to retain the triple lock until the next general election.

The triple lock guarantees the state pension will rise each year by the highest of price inflation, average earnings or 2.5%. Former pensions minister Baroness Altmann told the Observer last week that this is too costly and should be dropped.

Altmann said that she had asked David Cameron to drop the policy last year, but he refused on political grounds. However, she believed that Theresa May might be open to making the change, she said.

A government spokesperson told the Guardian that this would not be the case. "The manifesto contains a commitment to protect the triple lock. That commitment still stands," she said.

Pensions expert Alastair Meeks of Pinsent Masons, the law firm behind said that the government should be looking at the broader pensions picture rather than focusing on the triple lock.

"All the discussions about the triple lock betray a wider confusion about how Britain’s pension provision should be set up. By international standards, Britain’s state pension provision is not generous, and this reflects the longstanding policy objective of relying on private provision. The triple lock reverses this trend, but it does so for the generation who have already lived with the previous policy framework, effectively giving them a windfall," he said.

"The question is really what the right policy mix between public and private provision should be. The argument about the triple lock focuses far too narrowly on one little bit of this question," he said.

Altmann told the Observer that the cost of keeping the triple lock beyond 2020 would be enormous, and the money could be better used. She proposed, instead, a 'double lock' where pensions would rise in line with prices or with earnings. This would save billions of pounds, she said.

"Absolutely we must protect pensioner incomes, but the 2.5% bit doesn’t make sense. If, for example, we went into a period of deflation where everything, both earnings and prices, was falling then putting pensions up 2.5% is a bit out of all proportion. Politically nobody had the courage to stand up and say we have done what we needed to do," Altmann said.