State pension triple lock branded unsustainable as ‘means-tested approach’ urged | Personal Finance | Finance
The Government is legally required to increase the basic state pension and the new state pension each year in line with average earnings growth, CPI inflation, or 2.5 per cent.
Under triple lock, state pensions are expected to rise by at least 7.8 per cent in April 2024, after a 10.1 per cent increase in line with Consumer Price Index (CPI) inflation the previous year.
Mr Hunt is expected to confirm this 7.8 per cent rise in his Autumn Statement on Wednesday 22 November.
The move is estimated to cost the exchequer £90 million a year, prompting many to question whether the triple lock is sustainable.
An expert has claimed that reforms may need to be made to the way the state pension is raised each year.
Martin Hartley, CCO of the emagine Consulting Group believes that the triple green system of the state pension needs to be reformed as “it will never be sustainable” and it is a policy that does not fairly reflect the needs of this group of people.
Mr Hartley said: “We need to be introducing a policy which investigates whether a person’s occupation is fit for purpose by looking at their general health and well-being, to create a fair benchmark.”
The CCO proposed an alternative mechanism to work out pension increases, such as an individual lock-in policy, or the implementation of a means-tested approach.
Mr Hartley continued: “A single lock-in policy is an approach where only one factor, such as inflation or average earnings growth, is used to determine pension increases. This would be a more appropriate way to assess the landscape and ensure that everyone is taken care of.
“Another strategy is to adjust earnings. Instead of relying on average earnings growth, the government could implement a policy that considers the link between earnings and pensions, which would create a more flexible system.
“Implementing a means-tested approach, where pension increases are based on financial need, was also a way to manage pension entitlement.
“While there will be people who will fall through the cracks, it seems to be the fairest way to ensure that those who need support get it.”
The chancellor is expected to announce that the state pension will rise in line with regular pay at 7.8 per cent, rather than the 8.5 per cent rise in total pay when bonuses are taken into account.
Official data published last month showed inflation in September steady at 6.7 percent, which is less than the 8.5 percent growth in average wages in the three months to August.
The CCO of emagine Consulting explained that this increase is not generous and it is unlikely that people will be able to live comfortably on it.
But given that total state pension spending in 2023/24 is £124.4 billion, increasing it any further would be unsustainable.
The Chancellor and Mel Stride, the Work and Pensions Secretary, are under pressure over the triple lock because people have seen it too expensive over the years – especially amid high inflation and growth pay.
If the state pension rises by 7.8 per cent, instead of full pay as the basis for the triple lock, the basic pension will rise by around £837 next year, not the expected £902 if bonuses were included .
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