The ‘triple lock’ and intergenerational fairness

Gordon and Margaret

Today Age UK launches its General Election campaign – Dignity in Older Age ( – which aims to tackle some of the key issues that millions of older people continue to face. Things like difficulties accessing the care and support they so desperately need, living in poverty and struggling to make ends meet, and facing a later life of loneliness.

Throughout the campaign we’ll be covering some of the issues in depth, beginning with Caroline Abrahams on why having a decent income in later life is so important.

What’s the State Pension worth on average? Not surprisingly, most non-retired people don’t know, and the result is that when the ‘triple lock’ is discussed some rather important contextual information like this is usually absent.

The debate about whether the parties will maintain the ‘triple lock’ – the uprating of the basic pension by prices, earnings or 2.5% – has focused on the ‘intergenerational fairness’ of these increases. This discussion has been sharpened by a recent report from the Resolution Foundation that included the striking finding that average pensioner incomes have now risen above those of people of working age.

Stated this baldly, this assertion is somewhat disingenuous though as it only holds if you look at incomes on an ‘after housing costs’ basis. It reflects the fact that many older people already own their homes outright, whereas younger people are more likely to be paying eye-watering amounts towards a rent or mortgage. Our dysfunctional housing market is surely a big policy problem that needs addressing, but I don’t think it’s fair to use it to say that, on average, older people have higher incomes than younger groups, when on a ‘before housing costs’ basis they don’t. The report’s approach also overlooks some expenses that are especially significant for older people, notably the cost of social care for those who need it.

Having said this it is good that pensioner incomes have gone up on average in recent years, and by a significant degree, as the Resolution Foundation report is fair to observe.  According to the authors this is due more to people working for longer and increases in occupational pensions, as well as to more pensioners owning their own homes, than to increased State support, very welcome though that is.

However, a feature of our growing older population of some 12 million people is its enormous diversity, including in terms of income and wealth. Certainly, some people have done very well, but at the other end of the spectrum 1.9 million live in poverty and only about half the 65 plus population have enough income to pay income tax.

The same enormous differences are also evident among those aged 55 to 64 who are nearing retirement. The top 10 per cent of this group are worth well over a million, but the bottom 10 per cent own less than £28,000 (this figure includes all their possessions, housing and pension wealth). And two in five women in this group have no pension wealth at all and so are often looking ahead with trepidation.

So my question really matters, especially for the less well off: how much is the State Pension worth? The answer is that the State Pension is worth about £7,000 a year on average, less than many suppose. This is about half the National Living Wage and a quarter of median earnings, even with the ‘triple lock’. The State Pension also forms the bulk of the retirement income of the majority of today’s pensioners.

The triple lock meant that last year’s increase to the basic State Pension was enough for a designer latte at a coffee shop for the affluent, but a significant addition to the weekly budget for the poor. Although the ‘triple lock’ sounds generous it delivers relatively little in cash terms, because not very much of not very much is….not very much. Many older people told us that they did not see that increase as particularly generous, given they had made contributions through National Insurance all their lives, often starting work in their mid-teens. It is also worth remembering that in 1950 only 3.4% of young people went to university; that our State Pension is worth less in real terms than in many comparable countries; and that in some earlier times it was worth more in relation to earnings than it is today.

Different generations experience different challenges and opportunities and the Institute of Fiscal Studies (IFS) has helpfully compared the changing financial fortunes of the various cohorts born between the 1940s and 1970s. The younger cohorts earned more at an earlier age than older ones, but spent rather than saved more, and did not experience the same income rises between 30 and 50 as older groups had. They were less likely to own their own home and had lower pension wealth. However, more of them were anticipating an inheritance, so the authors conclude “inheritances look like the major potential reason why the later economic position of cohorts born in the 1960s and 1970s could yet turn out better than that of their predecessors”. Those most likely to benefit from inheritance are usually already financially comfortable, so these differences between the affluent and the less well off seem likely to widen.

Against this context you will not be surprised to learn that the differences in income and wealth within generations are significantly greater than those between them; a clear and consistent finding from official statistics that is usually omitted from intergenerational fairness debates.

Age UK therefore believes the case for retaining the ‘triple lock’ remains strong. Certainly, the people who would be hurt the most if it wasn’t there are older people on low and modest incomes, particularly women. We believe that an average £7,000 a year is not lavish for the State Pension, given how reliant on it so many older people are, and that it is crucial that its value is sustained.

A final consideration is that many of today’s pensioners had expected to buoy up their retirement incomes with interest on their savings, but years of historically low interest rates have largely scuppered that hope – a personal disaster for some living on quite modest incomes. For sure, low interest rates have helped people who want to buy a home – largely younger groups – but older people who had put money aside have lost out, sometimes badly.

Age UK wants every older person to have a decent retirement income, both now and in the future, so we are passionately interested in fairness for future older generations as well as for the current one. Too many ‘intergenerational fairness’ debates though, including the current one about the ‘triple lock’, miss out some key facts, often to older people’s disadvantage. I think it’s high time that changed.

5 thoughts on “The ‘triple lock’ and intergenerational fairness”

  1. Your article focuses on The Triple Lock which is a system that guarantees pensions keep pace with inflation. Can you therefore imagine a system that guarantees a pensioner no increases for life? This is what UK’s frozen pension policy cruelly does to 560000 British OAPs because of where they live.
    This is a law written not for those retired abroad, but for all those in Britain who will retire – period. This bad law affects you all whether you know it or not. It can affect you, your children, your grandchildren, your great grandchildren, etc etc etc.
    Isn’t it about time you did something about getting rid of it, so you can retire where you want to with a pension you paid for?
    Right now UK freezes it’s pension in 120 countries. Add the countries of EU to that and what’s left?? But the law doesn’t name any countries at all – it can freeze your pension anywhere on the planet – at the whim of any government. So for your own sakes – do something to get rid of this millstone that’s around your necks.
    Politicians say “Retire with dignity”. The only place you will be able to retire to before long with an indexed pension will be the UK itself!! Britain will become a nation of pensioners, because who’ll want to retire abroad and become eventually impoverished as time goes on. There’s no dignity in begging!

  2. There is no IogicaI, moraI or financiaI reason to deprive a pensioner of their earned and paid for pension indexation !
    Why have successive parIiaments continued this distructive and brutaI frozen pension poIicy when it goes against everything that parIiament stands for when it is run by the peopIe for the peopIe.
    The members stand by a Code of Conduct to ensure that there is justice and no discrimination.
    Read about it here :
    Did you notice the bIatant disregard for the frozen pensioners in this ?
    Why the code if it is not respected and upheId ?
    The Frozen pension is imposed by sectio9n 20 if the Pension Act and empIoys fraud to steaI from quaIified citizens based on where they Iive in the worId.
    This is justified ???

  3. What the Government does not tell you, the British Public!
    If you live in Great Britain or Northern Ireland and work or are self-employed, you (and your employers) may not be aware of the rules regarding eligibility for payment of a State pension.
    Be aware that these rules are under constant change, the present situation being that one is required to make National Insurance contributions for 35 years to qualify for the 2017 maximum payment of ₤155.65 (increasing to ₤159.55).
    Crucial information that the Government has been not telling all overseas pensioners or the public is that if, on retirement, they move to certain countries, mainly those of the British Commonwealth (eg Australia, Canada, South Africa) their pensions will no longer be increased annually, ie they will be “frozen” from the date of their arrival in their new location and for the rest of their lives! This penalty does not apply to those who move to the USA or Bermuda, to name just two “unfrozen” countries. The list actually totals over 100 frozen countries with a number of inexplicable anomalies, and includes the Falklands, India, Pakistan and the Overseas Territories. It is therefore very important to check the list with the DWP before considering moving abroad.
    Will this affect you or those in your family who, one day will choose to move to another country, perhaps your parents one day?
    The situation ante-Brexit is still undecided as to whether UK pensioners now living in EU countries will retain indexation of their pensions. If these pensions are also to be frozen it is very likely that many will return to the UK, as is already the case with large numbers already returning to the UK from South Africa and other countries where they can no longer survive on a frozen pension, which only too often is just a few pounds weekly. The extra pressure on an already struggling National Health Service will then come under even greater stress.
    Further important information that is not provided by the Government is that although frozen pensioners are granted the full rate of pension for the time they may spend in the UK, they are not eligible for free medical treatment while there, a cost that has caused major financial problems for those who had not taken out private medical travel insurance.
    To sum up, whether you have been paying N.I. contributions for decades, or will be working in the UK in the future, your entitlement to a fair pension (and those of your children) should not be taken for granted. Of course, unless you are banned from voting in the Election in June because you have been abroad for 15 years or more, you will have the opportunity to vote for a party which has expressed concern about the policy of the unfair, discriminative freezing of pensions. To date, only the Labour Party has indicated that they intend including frozen pensions in their manifesto but the situation could change several times in the next few weeks.
    Britain will become an Island of pensioners n the not to distant future as more and more pensioners are returning to the UK from overseas countries..

  4. Norma MaIoney said : “The situation ante-Brexit is still undecided as to whether UK pensioners now living in EU countries will retain indexation of their pensions.”
    If the UK Government poIiticians stood by their Code of Conduct as I mentioned then the discrimination wouId not be present and therefore not an issue as the pensioners in the EU wouId see no difference in their pension wherever they choose to Iive and Iikewise those currentIy frozen without any justification.
    Have a Iook at the CommonweaIth Charter and the Human Rights .
    So much for our government even embarrassing our Queen by having her sign this Iie !

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