Young people want to scrap pensions triple lock

Young workers will shoot themselves in the foot if they bring an end to the triple lock

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Scrap the triple lock

Young people want to see the state pension triple lock axed. It's easy to see why, as they will shoulder much of the burden for paying for it, but they could be making a huge mistake.

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The triple lock guarantees to increase the state pension either in line with wages, with prices, or by 2.5% a year - whichever is higher. It has been responsible for pushing the value of the basic state pension up to its highest share of average earnings since April 1988.

Research from Aegon found that there was most support for the triple lock among people in retirement or just reaching retirement age. Almost three quarters of those aged 70 and over support the triple lock, while 68% of those in their 60s support it, and 49% of those in their 50s.

The younger people are, however, the less support they showed for the idea. Of those aged 18-30, only 38% of people support the triple lock - and 43% of them would like to see pensions linked to price inflation instead.

Why?

On the one hand, it's easy to understand. Younger people will spend the greater part of their working lives paying taxes in order to pay for these higher state pensions. At the same time, they are being told that their state pension age will rise into their 70s and beyond, and there's a growing sense of doubt that state pensions will exist at all by the time they come to retire.

They are also living through a time of stagnant wage increases, so it's difficult to argue that they should pay for other people to have a rising income out of their taxes.

However, on the flip side, those who are a bit longer in the tooth, have experience of the difficulty of linking pension income to a single measure. Back when it was linked to price increases, it was vastly outpaced by wage rises, so pensioners became comparatively poorer every year. If it was linked to wage increases, meanwhile, there's a risk that at times of rising prices and falling wages those relying on the basic state pension - and living on a low income - would not be able to make ends meet.

Better off

It's also worth noting that those who stand to gain the most from the triple lock are the younger generation - assuming that there is a state pension in a few decades time.

In the seven years since the lock was introduced by the coalition government, the pension has risen £107 more a year than it would have done under a double lock. Given that some of those surveyed have 50 years to retirement, it's easy to see how much income they could miss out on in retirement if the state pension was moved to a double-lock - or even a single one.

Given that when these younger people come to retire, they won't have the benefit of generous final salary pensions, the extra income from a state pension will be even more essential.

Steven Cameron, Pensions Director at Aegon said: "In some sense, offering less generous increases to the state pension would benefit younger age groups. State pensions are not funded in advance, so it's the income tax and National Insurance contributions of today's working population that are funding the payments those in retirement receive. However, in the long run younger workers could miss out from a pension that is constantly uprated by a minimum of 2.5% before and after they retire. These findings highlight the intergenerational impacts that policy changes can have not just now but also in the future as people's priorities change over time."

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