Cash-hungry Treasury may target pension ‘triple lock’

PUBLISHED: 17:04 23 October 2020 | UPDATED: 17:04 23 October 2020

CPS this week shocked pensioners by calling pension triple lock an “engine of unfairness”, says Peter Sharkey. Picture: Getty Images

CPS this week shocked pensioners by calling pension triple lock an “engine of unfairness”, says Peter Sharkey. Picture: Getty Images

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CPS this week shocked pensioners by calling pension triple lock an “engine of unfairness”, says Peter Sharkey.

No doubt conscious of the already enormous and rapidly growing hole in the UK’s public finances, on Wednesday, the Centre for Policy Studies (CPS), a centre-right think tank, published a report, Saving £30 billion: 9 Simple Steps, outlining the organisation’s proposals for the Treasury to save at least some money rather than constantly shelling it out.

The CPS’s intentions were entirely laudable but some of their plans appeared naive; others were simply unworkable. One, however, if adopted by the Treasury, could have significant repercussions for both pensioners and those within sight of retirement.

With the enthusiasm of a wide-eyed fourth former, the CPS suggest that £6.5 billion could be saved by reducing government administrative staff, ‘cutting quangos’ and merging back-office functions. Of this there is no doubt, but the proposal is simply impractical. Can you imagine the level of political opposition to such a move? Any industrial action caused in the name of ‘efficiency’ could drag on for months; meanwhile, if the plans were eventually implemented, unemployment would soar.

Perhaps the most optimistic CPS suggestion is to ‘streamline’ local government which it believes would save us £1 billion a year. Good luck with that. As we have seen over the past week, the government appears incapable of imposing the law of the land on Manchester; goodness knows how it would fare when trying to remove swathes of bureaucrats from town halls.

According to one of the most sensible CPS suggestions, the process of ‘improving procurement’ would save the nation £4.5 billion annually.

As we saw during the early days of the pandemic, the NHS had plenty of chiefs, each of whom appeared in charge of one area of procurement, yet despite having tens of millions to spend, some hospitals found themselves short of personal protective equipment. It’s easy to blame the government (and many did) for this, but frankly, it’s not Matt Hancock’s job to organise the delivery of gowns to the local hospital; it’s the role of the people in charge of procurement.

Instances of public sector bodies frequently overpaying for supplies, or over-ordering and stock-piling items that are obsolete by the time they come to be used occur with frustrating regularity.

“Much of the necessary improvement [in procurement] could be accomplished…by the application of common sense across the public sector,” notes the CPS report. It has a point: properly ‘improving procurement’ could probably save three times the CPS figure. Every year.

Unfortunately for the CPS, the work involved in implementing most of their more optimistic proposals almost certainly means that the Treasury or their political masters will ignore them.

However, there is one suggestion which the CPS maintain would save £2 billion annually; it’s relatively easy to execute and while it would be unpopular with the group it intends targeting, the group itself is so unorganised that the Treasury would have little difficulty amending the law to implement it.

Changing the pensions triple lock to a dual lock is, the CPS’s eyes, a realistic option; its report notes that the “triple lock has become an engine of unfairness, ensuring that pensioners’ incomes are always protected at the expense of other generations’”.

Whooaah there.

It’s worth remembering that most retired people worked their whole life, paying into a system for 45-50 years which guaranteed them a state pension upon retirement. This hasn’t created ‘an engine of unfairness’; people are merely receiving a return on an investment they’ve made over almost five decades.

Second, while pensions have been protected by the triple lock for the last ten years, the arrangement is anomalous. Over the preceding 62 years, between 1948-2010, pensioners were rarely, if ever, considered prosperous, especially if the state pension was their only source of income.

Furthermore, the ‘other generations’ to whom the CPS refer still have the opportunity to increase their savings from earnings, something pensioners clearly do not.

To claim that the state pension is paid ‘at the expense of other generations’ might be absolute tosh, but this may not prevent a cash-hungry Treasury from ‘amending’ the triple lock to make the arrangement “less generous”.

As the Treasury explores ways of saving money, many retirees will be conscious of the fact that their triple locked pension is a relatively easy target. It could be time for serious financial planning which incorporates all possible sources of income...

For further details, see Peter Sharkey’s latest blog, Retirement Planning, online at: www.moneymapp.com/blog

Your retirement planning may involve equity release, but how much could you release from your home? The figure is determined primarily by your age, health and your property’s value, which must be at least £70,000. These are the principle requirements, although alternative options exist based upon personal circumstances. You can get a very good idea of how much equity you can release by visiting the Moneymapp.com website and filling out the equity release calculator.

It’s worth noting that equity release isn’t a panacea. It’s not suitable for everyone and it may compromise your eligibility for means-tested state benefits.

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As many readers have already discovered, there’s a wealth of information to be discovered at: https://www.moneymapp.com/equity-release . In addition, there are hundreds of blogs and articles dealing with the subject on the Moneymapp website, including Peter Sharkey’s weekly blog, rated among the UK’s very best. Read more at: https://www.moneymapp.com/blog

You may still email any queries or questions regarding equity release to: enquiries@moneymapp.com

Please note that Moneymapp.com cannot advise readers on whether equity release is suitable for them. However, Moneymapp.com can introduce readers to professional advisers who will explain the process and its implications for your estate and entitlement to means-tested state benefits.

ONLINE

Retirement Planning

Read Peter Sharkey’s latest blog exclusively at www.moneymapp.com/blog

For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.


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