State pension aims have varied, from providing a basic level of income, to helping people maintain living standards, and back to a basic income under the new state pension (nSP).

The nSP currently provides 24 per cent of average earnings; it is not clear whether this amount is expected to provide an adequate income, and how much the state expects people to be able to afford to pay privately.

The state pension currently increases each year by the greater of the rise in earnings, prices or 2.5 per cent (the triple lock) which makes up some of the value lost from when the state pension was price linked (1980-2010). However, it also will increase the cost of the state pension over time, though a large proportion of the expected costs are due to increases in the number of pensioners.

The government has pledged to maintain the triple lock during this parliament, ending in 2022, but may then index the state pension to a double lock (the greater of earnings or prices) or to earnings.

Removing the triple lock would save the state money but would increase the amount that people would need to save for a comfortable standard of living in retirement and would result in higher poverty. However, it is hard to properly assess the implications of choosing different indexation scenarios until the aim of the state pension is fully clarified.

Share Story: