Here’s that Royal London press release, calling for State Pensions to be reduced and contributions to private pensions to increase.
Royal London has set out a three point plan for the key pension priorities of an incoming government, including a ‘middle way’ on the triple lock.
In response to suggestions that the policy be abolished outright because of cost pressures, Royal London proposes a way which would control costs and focus more generous annual increases on the pensioners who need it most.
Royal London proposes that the government retains the triple lock for all pensioners on the old ‘basic state pension’ (those who retired before 6th April 2016) but reverts to earnings indexation for those on the new state pensions.
The change would save around £500m per year by 2021/22, rising to nearly £3 bn per year by 2027/28, and because newly retired pensioners are on average £100 per week better off than those aged over 75, this policy increasingly focuses money on the older, poorer group. It would also deal with an anomaly whereby the triple lock is of more value to newly-retired pensioners than to older pensioners.
This anomaly arises because the triple lock applies only to the old basic state pension (currently £122.30 per week) for those who retired before April 2016 but to the full new state pension (currently £159.55) for those on the new system.
The other two points in the plan include getting the self-employed into pensions by extending automatic enrolment, as well as getting employees to save realistic amounts through annual step-ups in contributions.
Royal London Director of Policy, Steve Webb, said: “The triple lock has delivered big improvements to pensioner incomes since 2010 but political parties will be concerned about the long-term cost implications of this policy on top of increased spending on health and social care associated with an ageing population. On the other hand, abolishing the triple lock outright would leave many existing pensioners on relatively modest incomes, with older pensioners facing much lower living standards than the newly-retired. A ‘middle way’ approach would preserve the triple lock for those who reached pension age under the old state pension system, whilst reverting to an earnings-link for the newly retired. This would cap the cost of the triple lock whilst focusing spending increasingly on the older and poorer section of the pensioner population.
“To complement the state pension, we need to see high levels of saving into workplace pensions and more people saving into a pension. We therefore advocate an annual step up of contributions by the employed population, with contribution increases timed to coincide with pay rises. This is likely to be the least painful way of getting people to save more. We also want to see a form of automatic enrolment applied to the self-employed, given the dramatic increase in pension membership when a similar approach was taken for employed earners.”
Steve is of course authoritative on this, he helped design the new state pension and is responsible for the anomaly! Those retiring before its integration are getting the triple-lock upgrade on only part of the pension because the remainder is still paid as the state second pension (or not paid at all if the person is contracted-out). Contracted-out pensions and S2P don’t get the triple lock.
But the reason you kept it this way was in the interests of simplicity and fairness, those of us still to retire give up part of our pension entitlement under a contracting-out deduction (COD) which obviously doesn’t get the triple lock either!
Come off it Steve, either bugger back to Thornbury and Yate and get re-elected or stop interfering as a “former pension minister”.
The press release calls for stepping up increases into workplace pensions. Royal London is a workplace pension provider, the increased contributions would increase tax -relief to private pensions at the time the former pensions minister is advocating reducing the public pension promise to those currently enjoying the triple lock or the promise of getting its benefit.
Put more simply, Steve is advocating more private pension provision and less state pension provision. He’s doing so with the authority of being a former Minister of State and with the salary of being a Royal London executive!
If you aren’t going back to Yate, you aren’t in parliament. If you continue to work for Royal London, you are lobbying for Royal London. It’s not just the policy proposal that is muddled, it’s the motivation!
Further coverage of Steve’s proposals are carried by the BBC; http://www.bbc.co.uk/news/business-39748174
But you may prefer to read Steve’s proposals for the triple lock in 2014 , pledging a triple lock well beyond today (thanks to Annie Shaw for this memory)