The UK "triple lock" on pensions

In My Humble Opinion
1

https://www.msn.com/en-gb/money/other/state-pension-triple-lock-shock-as-labour-pledge-puts-tories-on-the-spot/ar-BB1izcPH

Under the triple lock, the state pension increases every year in line with wages, inflation or 2.5 percent, whichever is highest. It was a Tory policy which Labour are now pledging to enforce.

Can nobody see that the inevitable reslult of taking 1 of 3 geometric measures and always choosing the highest is just a measure to create out of control growth, growing much higher than any of the 3 measures individually? This was a stupid idea in the fiirst place, unsustainable both in the short, medium and long term and should be conisigned to the dustbin of history along with many other badly thought out ideas.

2

Nonsense.

Raising pensions in line with inflation is absolutely necessary to prevent the exact thing public pensions are meant to prevent: elderly penury.

In this equation, raising pensions in line with wage growth only matters when wages are growing faster than inflation. Which has not been the story of the last couple of decades in most of the civilized world. I can’t speak specifically to the UK’s stats. But when wages are growing faster than inflation that is a sign that economic inequality is declining. Since public pensions are overwhelmingly important to the former working class, and of little to no importance to the wealthy classes, having pensioners participate in that equalization seems fair. And also, practically speaking, helps to offset the fact that pensioners spend their money in ways more in line with the working classes, and official measures of inflation tend to mis-track that by a goodly amount.

Raising pensions by 2.5% is in fact potentially problematic, but only in eras where that’s the largest of the three factors. Which it has not been all that often over the decades. And again represents simply another form of wealth transfer from the wealthier segments of society to the less-wealthy. Which is very necessary in a red-meat capitalist society where all the economic gravity is pulling the other way.

Arguably a more complete solution to the 2.5% question is to mandate that not just pensions, but in fact all wages, both hourly and salary, be mandated to rise by 2.5% every year. As an explicit counterweight to the capitalist gravity that only pulls wages down.

3

Out of control growth? Have you seen the amount of the state pension? It’s miserly. Nobody could live on it. If there’s any chance of the state pension playing catch up with the rest of the western world then THANK GOD but it’s got so far to go it’s never going to happen.

4

Are you kidding £200/week “nobody could live on it” Do me a favour.

5

Well, prices vary a lot from place to place, but that’s not enough to live on where i live (an expensive region in the US.) I guess y’all don’t have to pay for medical care out of that, but there’s still food, lodging, utilities, maybe some new underwear from time to time and some soap, etc.

6

That £200/week is before housing benefit if needed, and a fuel benefit as well. The rest of the stuff is easy to live on with £200. (£204 more precisely)

7

My rent for a space in a senior park is $800/month. And that’s cheap around here.

8

Looking forward, the 2.5% is probably irrelevant for the next decade, I think the period of ultra-low inflation is probably a historical aberration. And from what I can see (I’m not sure exact what measures they use) wage growth has not usually been significantly above inflation.

So purely mathematically it’s not a problem in the short term if you assume the fairest benchmark is inflation. If one of the other two benchmarks exceeds inflation by 1% every year (and even that looks unlikely to me) then after 10 years the pension has only increased by 10.5% in real terms.

Sure, if you were irrevocably locked into the policy for 100 years then the exponentially growing increase in real terms would get out of control at 270%. But why would you think that the policy wouldn’t just change well before that happened?

9

Query: what’s the average rental cost of a one bedroom apartment in London? Having a real number, even an average, would help with the discussion.

10

That you, 30p Lee? £200 per week is bare subsistence living, hoping you don’t have any rent, mortgage, letting management fees or property maintenance costs to pay. Good job you never want to eat in a restaurant ever again, or go on a modest holiday, or replace an old car, or buy a new suit for your grandchild’s wedding or a new mattress to help your bad back, or have a pet who needs vet attention.

People need more than food, electricity and a TV remote to live.

Is that what you want, after an entire working life of paying into the system? State pension isn’t a benefit - we pay for it. And we don’t get enough from what we pay in.

11

The state pension was a Ponzi scheme. I think it still is, but it certainly was in their day. The amount they “put in” has by all reasonable measures been spent many many times over. And yes £204 plus housing benefit plus winter fuel and various other benefits allows you much more than "food, electricity and a TV remote "

Give me housing benefit, fuel payments, assorted other benefits and £100 a week and I would bite your arm off.

12

They? Who’s ‘they’? The state pension is for all of us. We all put in, help pay the people who are currently taking out, and we all get it when it’s out turn. It’s how pensions work.

13

Certainly, £200 a week is not much, but it comes with some other useful benefits:

  • As well as the standard free NHS healthcare, you get free prescriptions worth just under £10 each.
  • The local council will provide a free bus pass for bus travel in the UK.
  • For a small charge, rail fares can be discounted by as much as 70%
  • If you can still work, (and note that the qualifying age is only 66) you no longer have to pay NI (currently 12%) although, you will be taxed on anything you earn over about £40 a week. The same applies if you have any other pension(s). The state Pension is not means tested.
  • Many venues such as theatres and amusement parks etc have concessionary rates for pensioners.
14

Yes, pensioners get a pension, and will continue to do so. I didn’t claim or suggest otherwise.

The idea that they are merely getting out what they put in though is wrong, that’s all been spent on them many times over, as is the idea it’s not enough

15

I’d ask the OP what their real (not modest) proposal for UK pension reform is, given that they think the current system is bonkers / unaffordable.

You’re simultaneously King and PM with an unassailable majority for a week or three: what bold now system do you decree?


If your real complaint is simply that public pensions are mis-sold to the public as “just getting back what you put in” when actuarially that’s poppycock, well … your complaint is factually correct, but applies to every public pension worldwide and is functionally moot to boot. Politics, just like commercial marketing, often involves “selling the sizzle, not the steak” as we say in the USA.

16

This is hyperbolic nonsense.

Any nominal bookkeeping that you’re “getting back what you put in” to a ringfenced fund just doesn’t correspond to reality. The social contract in the UK is that people pay taxes through their working life, at least somewhat progressively according to their ability to pay, and when they retire they get a state pension, at least somewhat related to their basic needs.

So to determine whether its valid to compare it to a Ponzi scheme you need to look at where the government stands now for total revenue vs expenditure, and how forward-looking demographics and other factors are likely to change that.

The UK debt-to-gdp ratio at around 103% is middle-of-the-pack among developed countries (US 122%, the ever-prudent Germany 67%). The extreme outlier that’s looking more like you could justifiably call it a Ponzi scheme if you hope to get a government pension in 25 years is Japan at 261%, with terrible demographics.

This seems to be a pretty even-handed overview of the prospects for the UK state pension and related benefits. There are some challenges sure, but this is not the unsustainable budgetary black hole that you imply.

https://ifs.org.uk/publications/future-state-pension

17

Putting it in terms of US figures, since that’s what I’m most familiar with:
That’s about 250 US dollars a week, or a thousand a month, or 12,000 a year.

The Federal Poverty Level is about 15,000 a year for a household of 1, 20,000 a year for a household of 2.

Someone whose income is below those levels might well qualify for SSI (supplemental security incme) or SNAP (“food stamps”).

My inlaws were getting more than the Federal poverty level, from Social Security; I’m making a WAG in guessing that housing help and SNAP might have basically made someone at the FPL equivalent to their income. They were barely making ends meet. They only did as “well” as they did because we were paying their housing expenses; they were in the position of not being “poor” enough to qualify for housing assistance, but not being able to afford to live without it.

Anyway, getting back to the UK figures: given that there is a better social safety net (medical, housing etc.), I could see that someone COULD live on 200 pounds a week, but it would be a very straitened existence, especially anywhere with higher prices.

Presumably the UK, as in the US, intends the scheme to supplement one’s own savings, not to be the sole source of income. But I would guess that, as in the US, far too many people wind up retiring without any other assets, through poor planning or bad luck.

Interestingly, only public pensions have any kind of cost-of-living scheme here in the US, not private company pensions. Social Security’s increases are, I think, ONLY tied to inflation, not wages in general nor any 2.5% floor. And our benefits have basically been cut in recent years (e.g.the increase in minimum retirement age, among others).