Pensions and the triple lock. Do we care?

  As an ex pensions actuary and now a pensioner I am uniquely placed to comment on the pensions policy of the current and any future government.

  There is absolutely no doubt that the bill that first introduced pensions, the National Insurance Act 1946, and the intention of the government of the time, was for pensions to be a right and not a benefit. Although there was no requirement for the contributions to be ring fenced, as in the private sector, those contributions, made by employees and employers in the form of National Insurance contributions and the government making up any shortfall, were sold to the public as “investing in your country”. An investment for the future that is paid back to you as a pension and NOT a tax. This is why it was called National insurance contributions, so that people did not see it as an additional tax. Yes, the pensions of yesterday are paid by the workers of today, which does appear to be a Ponzi scheme, but governments of the day were able to use predictions to make sure there were ample money to fund future pensions. The initial pension, in 1945 was 26 shillings a week for a single person, £1.30 in decimal currency. With inflation this would be worth £67.60 a week today. Considerably less than the current pension of £184.90 a week for those on the old state pension (those over 85 now) and £241.30 a week for those on the new state pension.

A right then and not a tax and never to be means tested

 The triple lock was first introduced by Gordon Brown when he was chancellor in Tony Blair’s government. It introduced the rule that the state pension should increase each year by the higher of inflation, wage growth or 2.5%. The reasoning was that our state pension was well below the average in the EU and that we needed to catch up. It is still about 20% below the average in the EU.  However this did not take into consideration that there has long been an excessively high and unaffordable state pension in France and that the Scandinavian countries did not have a long history of private pensions so relied more on the state, both of which dragged up the average. We are no longer in the EU so why use that as our measure?

I believe it is fool hardy for Reform UK to promise to keep the triple lock. We do not know what state the country will be left in when this government finally falls but I expect the note left for the next chancellor will be “Sorry, but we are in debt up to our eyeballs”. Reform should not be making promises that we might not be able to keep. The electorate understand that we need to be fiscally responsible and they do not need to continue the Uniparty mantra of government by soundbites. We do not need a chancellor who is “just following the rules”, we need one who looks at all the liabilities and can be decisive. Of course we need to look at inflation and wage growth in that decision, but a sensible government will look at running averages over several years to avoid single year spikes. 

Let’s have a chancellor who looks at the figures and does not blindly follow the rules.

  Successive governments have kicked this can down the road as a problem they don’t want to face but the current system is inherently unfair and needs to be addressed. 

None of us know if we will need to go into a home because of dementia, physical difficulties or just old age. The cost is eyewatering. My mum went into a care home in 2017 and the cost was more than £70,000 a year. We quickly went through all her savings. My dad was still living in their home and we were just in the process of taking out an equity release mortgage to fund mum’s future care when she died in 2019. 

You cannot insure yourself against needing care as the premiums would just work out too expensive. However if the whole country was required to contribute something towards it, a compulsory contribution, as an insurance premium, we might be able to afford it. This time we should involve insurance companies and not trust the government to carry this risk but we could perhaps then afford a decent payment towards covering care costs by insurance and family could pay any excess is they wanted something better than standard care. This would also enable homes to pay a decent wage to care workers who are an essential profession and should be acknowledged as such. They need to be paid a much better wage and have a proper career progression. 

Let Reform UK be the first government to address adult social care.