What happens to the state pension is of huge interest to ordinary people
It should come as no surprise to those who follow Steve Webb or read this blog that the anticipated 8.5% pension increase “guaranteed” by the triple lock is under VAR.
A decision on the definition of earnings will follow shortly and while the goal might stand, the referee (DWP SOS- Mel Stride) is staring intently at the monitor.
Webb pointed out last month that Average Earnings for the months leading up to the September calculation were going to be distorted by one off payments to health and other public sector workers. These will work themselves out of the earnings figures in 2024 but by then the increase to the state pension will be hard coded. Government is letting it be known that it reserves the right to change definitions just as they did in 2021 and more importantly when they switched inflation calculations from RPI to CPI.
Should we be surprised?
No we shouldn’t. Your gold plated DB plan (if you have one) is only as good as its funding and the capacity of an employer to fund it. If you are one of the 440,000 people whose pension is paid by the PPF, you have no longstop- if things go wrong, your pension falls.
Pension guarantees are so complicated, they depend on so many unknowns , that the best we can expect is the fair distribution of what is behind the promise.
It is far better that we own up to the reality that we can only be paid what is there. If you are one of the pensioners of the Wilkinson (Wilko) DB plan, you are increasingly looking like joining the 440,000 PPF members.
If you are one of the 20,000 Wilko employees with rights in the People’s Partnership, you have the best endeavors of their trustees and pension executive who invest your money, for the pot you receive. Unless something changes , it will be up to you how much income you take when you retire and up to you whether that income runs out before you do.
We should not be surprised that Mel Stride might re-interpret the definition of earnings and reduce the impact of the triple-lock on the state pension, there is only so much of our money to go round. Even Government operates on a “best endeavours” basis.
Beware false prophets bearing guarantees
There are no jobs for life, earnings don’t always go up with inflation and sometimes earnings go down. We live with uncertainty at work and we live with uncertainty about our incomes in retirement. Most of all, we have no control of how long we retire though we can make plans for those we love – when we die.
Plans are not guaranteed either. We make the most of what we have and thank God we are not living in the Atlas Mountains or north-eastern Libya. Those who preach certainty are holding out false hope or selling a commodity too rich for our blood.
Which is not to say that we shouldn’t pay heed of broken promises. If Mel Stride returns from the monitor and rescinds the goal, if Wilko cannot find a backer for its pension scheme, if People’s Partnership can’t offer a pension from its workplace pension, we should feel let down.
Jeff Prestridge makes the point powerfully in the Mail, using reader’s comments. I can point to comments on this blog to show how powerful feelings are on this matter.
Mess with our triple lock pension at your peril! pensioners warn PM https://t.co/A7qik4zGeV via @MailOnline
— Henry Tapper (@henryhtapper) September 13, 2023
But it is part of our contract with Government and governance, that best endeavours are applied – or put more simply – those who we trust have done their best. Which is why we moan but ultimately – move on.
Pensions are different
Because of the time waiting till pensions get paid and the time that passes while pensions are paid, pensions are different. A 25 year mortgage might occupy a quarter of your life, a pension takes up four/fifths (assuming a 100 year life).
We cannot predict our journey at outset or the many turns it will take before it ends and we live with this mutability with stoicism and good humour.
We know that pensions are hard and that is why most of us look to experts to take decisions on our behalf. We need those experts to be honest and explain to us that the rules we trusted, sometimes get broken, that best endeavours do not always work out.
I would like Mel Stride to walk away from the monitor and let the goal stand. I expect he won’t – either way, I put my trust in his judgement – we have no other choice.
Pensions are different and we have to accept they won’t turn out the way we expect. If we can have confidence in those who manage them, we will find them much more enjoyable.
