Torygraph is floating ideas for future cuts...
www.telegraph.co.uk/pensions-retirement/news/britains-state-pension-unsustainable-something-has-give/
Today’s inflation figures should have given retirees reassurance that, come next April, their lagging state pension income will increase in real terms.
But despite Prime Minister Liz Truss’s repeated commitment to the triple lock in her leadership campaign, her Government has this week refused to stick to its word.
The triple lock has now become a weighty Tory party promise to woo older voters.
A U-turn on the triple lock after it was suspended last year would surely now be unthinkable.
Perhaps not now, but something has to give eventually. Using today’s inflation rate of 10.1pc, the state pension should rise by £22.70 a week to £203.85 from April 2023 for those collecting the post-2016 state pension.
The state pension is becoming increasingly expensive. There are more of us, people are living longer, and the triple lock adds to that growing cost. Each percentage point rise is thought to cost the Treasury around £1bn.
And the problem with the triple-lock is that while millions of pensioners rely on it, many do not need it. It’s a colossal expense that it is both valuable and wasteful.
The state pension started out as a means-tested benefit purely to keep the very poorest over 70s out of poverty at a time when the average life expectancy was well below 60.
Now the state pension is a retirement staple that pensioners, both rich and poor, expect to receive. It’s vital income for some, and a bonus for others.
But with the triple lock promise, the Government has chained itself to an enormous commitment that would now be political suicide to abandon. To get out of this hole, Britain needs to radically rethink its relationship with the state pension.
It is right that it remains a universal benefit available to all retirees – but those who need more, should get more, and vice versa.
An obvious way the Treasury could save money is to raise the state pension age even higher. But this solution risks penalising those who have toiled in physical, hard jobs and need to retire earlier on health grounds.
It is also unfair on those who have a lower life expectancy. Perversely, those from deprived areas who rely on the state pension the most, are likely to receive the least of it.
Another idea would be to means-test the state pension again. Do retired public servants really need the taxpayer to subsidise two inflation-linked pensions for them? How can it be right that a judge or senior civil servant on a £100,000 annual pension, receives a full state pension?
Retirees of all walks of life often say that they deserve a state pension because they have paid in, and therefore the taxpayer must pay out. But do they realise how generous the payout is?
Sums from pension firm Aegon show that a worker earning £30,000 a year would pay around £2,092 in National Insurance contributions a year, some of which goes towards funding the NHS too. Yet if they make that contribution every year for 35 years, they will qualify for the full state pension currently worth £9,627 a year.
That’s a total contribution of less than £75,000 to receive at least £9,627 a year – or more than £185,000 over a typical 20-year retirement.
An annuity paying the same as the state pension would cost £211,700 to buy today. Whatsmore, if a worker was to pay that same £2,092 annual NI contribution into a private pension which grew at 4.25pc a year, it would only be worth £120,000 in today’s money over their career.
Expectation for the state to provide for us in retirement has evolved into entitlement.
The state pension has also become a tool with which to bribe older voters, and as a result the triple lock is one U-turn the Government can perhaps not afford to make.
Yet for our state pension system to be affordable and help those who need it, it will need to be seen as a benefit again rather than an entitlement.