The Government should scrap the triple lock on pensions, former prime minister Sir Tony Blair’s think-tank has said.
A new report by the Tony Blair Institute (TBI) argues the state pension is ‘outdated, increasingly unaffordable, and too rigid for the way people live and work’.
It urges the Government to replace the triple lock with a new pensions system that would enable people to access funds earlier in life – to retrain, change careers or take on a caring role.
Sir Tony’s think-tank proposes reforming the pensions system and replacing it with a ‘lifespan fund’ that would enable people to build entitlement through activities including work, caring and study.
Annual contributions to this notional fund would then provide up to 20 years of state-backed support at the level of today’s state pension, the TBI said.
People could access some of that entitlement during their working lives at ‘critical periods’, such as unemployment, retraining or caring.
Those who do choose to access this support early would then be automatically enrolled into higher national insurance contributions when they return to work ‘to rebuild what they had drawn down’.
However the TBI argues that the first step to reforming the pensions system must be to scrap the triple lock to prevent the state pension rising faster than earnings growth.
Former prime minister Sir Tony Blair’s think-tank has urged the Government to scrap the triple lock on pensions
Tom Smith, director of economic policy at the TBI said: ‘Britain’s state pension system was built for a different era. We can’t keep pouring money into a system that is increasingly unaffordable.
‘Pension spending must be contained, and that means the triple lock cannot continue after the next election.’
The so-called ‘triple lock’ dictates that pensions must rise every April by the highest of three metrics: earnings growth, inflation dictated by the Consumer Prices Index (CPI), or 2.5 per cent.
There are 12.6million pensioners in Britain today and this is set to rise to almost 19 million by 2070. On current projections, the state pension will cost an extra £85billion a year by 2070 – more than the annual defence budget.
The think-tank has warned that without reform the increased cost of the state pension will ‘steadily squeeze out other spending priorities or push taxes higher’.
The TBI estimates that its proposed reforms would hold long-term pension spending at the current level of about 5.5 per cent of GDP – saving about £66billion a year in additional costs by 2070.
But Caroline Abrahams, charity director at Age UK, said the triple lock should be retained into the next parliament as it has helped to improve the living standards of some of the poorest pensioners.
She added: ‘We continue to hear from older people who are struggling financially, and the extra money the triple lock delivers makes a meaningful difference to many lives.’
A Department for Work and Pensions (DWP) spokesman said: ‘Supporting pensioners is a priority and our commitment to the triple lock for the rest of this Parliament means millions of pensioners will see their yearly state pension rise by up to £2,100.’
