Guaranteed rises in the state pension should be scrapped according to a damning report by an all-party committee of MPs, which claims the British economy has become “heavily skewed” towards well-off baby boomers.
Following an inquiry into intergenerational fairness, the Commons work and pensions committee, chaired by influential welfare reformer Frank Field, said the “triple lock” guarantee on the state pension should be axed as it is “unfair and unsustainable”.
Under the triple lock, pensions have risen every year since 2010 by – whichever is the higher figure – the rate of inflation, average earnings or a minimum of 2.5%. This has lifted many pensioners out of poverty but the committee said it has resulted in the over-65s taking an “ever greater share of national income”.
After housing costs, average pensioner household incomes now exceed those of working-age people, said the report. “The millennial generation, born between 1981 and 2000, faces being the first in modern times to be financially worse off than its predecessors,” it added.
The committee also calls for a review of the winter fuel payment, worth at least £100 and up to £300 to pensioner households. It costs the Treasury £2bn a year and the MPs said it should “not be off limits” when the government seeks budget savings.
But ministers immediately rejected any suggestion that the triple lock, hugely popular among older voters, should be abandoned. In a statement, the Department for Work and Pensions said: “We want to ensure economic security for people at every stage of their life, including retirement. We are committed to the triple lock, which is protecting the incomes of millions of pensioners.”
The report comes amid an intensifying debate over intergenerational fairness. Research from the Institute for Fiscal Studies suggests pensioners are less likely to be poor than younger age groups and that they have higher average incomes than working-age households.
Frank Field MP, chair of the committee, said: “The welfare state is underpinned by an implicit intergenerational contract. Each generation is supported in retirement by their in-work successors. But a combination of factors has sent the balance out of kilter. It is now the working young and their children who face the daunting challenge of getting on in an economy skewed against them.
“Homeownership, taken as a given by many in my generation, is out of reach for too many aspiring young people today. At the same time as tightening their belts, they are being asked to support a group that has fared relatively well in recent years.”
Field added that no party has been immune to chasing the pensioner vote but added: “Politicians of all stripes must accept some responsibility for these trends, and we must act together now to address them ... It is time for the triple lock to be shelved.”
The committee proposes a new formula for future increases in the state pension, which it suggests should be a benchmark proportion of average earnings below which it could not fall. It added that all parties must seek “political consensus on a new earnings link for the state pension” before the next general election.
But pension experts warned that pensioner incomes will start falling within the next decade, even with the triple lock. David Sinclair of the International Longevity Centre, said “While it is right to debate cuts to pensioner benefits, we must take care not to throw the baby out with the bathwater. This debate cannot be about young versus old.”
Tom McPhail, of advisers Hargreaves Lansdown, said: “Politicians are chronically compromised when making any policy decisions [that] might be detrimental to older citizens. You only have to look at the turnout in general elections to understand why: 78% of the over-65s voted, compared to just 43% of the eligible under-25s.
“The triple lock has served an important function in bringing pensioner incomes back into line with the rest of the population. It is also important to recognise that pensioner incomes will change again in the future, we are about to hit ‘peak DB’ after which successive pensioners will be increasingly reliant on the state pension and on defined contribution arrangements. Any measure to curb either of these in the next few years could rapidly push more pensioners back into poverty.”
