Triple lock plus is ‘positive news’ but could pile pressure on financing the state pension | Personal Finance | Finance

The triple lock plus could be a welcome boost for many state pensioners but it could make financing the state pension more difficult, an expert has said.

The policy was put forward by the Conservatives this week as part of their General Election campaign, proposing that the personal allowance increases for pensioners, using the triple lock metric.

Mark Pemberthy, benefits consulting leader at Gallagher, spoke about the potential benefits for pensioners.

He told “The introduction of the ‘triple lock plus’ means that the nil-rate tax threshold is set to increase, ensuring that pensioners won’t pay any tax on their basis state pension, even when it goes up.

“This is definitely positive news for those in receipt of the State Pension, but it does introduce some wider challenges.

‌”For instance, if the nil-rate band for everyone else does not increase simultaneously, there will be concerns about intergenerational fairness as workers would pay tax on a higher proportion of their income than pensioners.

“Particularly as that tax funds the payment of the state pension and the age that younger workers will start to receive their State Pension keeps getting pushed further and further into the future.”

Another expert recently told the state pension may soon have to become means tested to keep the payments affordable.

Mr Pemberthy added: “While the principle of a tax-free state pension is an attractive one, having differentiated personal tax allowances for pensioners and workers introduces even more complexity in a pension and tax landscape that is crying out for simplification.”

He said the future Government will have to confront the fact the triple lock is becoming unsustainable.

He elaborated: “This is unaffordable without significant increases in tax, or further increases to the state pension age, both of which place an unfair burden on younger workers and future generations.

‌”These are long term issues that go way beyond the usual five-year political horizon of any Government.

“Irrespective of how the next election plays out we need an honest debate on what benefits people receive after they stop work and how that is paid for – with a long term strategy that is immune from short term political decisions.”

Turning to what could replace the triple lock, the expert said: ” The state pension is currently worth about 30 percent of average earnings, and the triple lock will have the effect of increasing this proportion over time.

“If we can get consensus on what the value of the state pension should be relative to earnings as a foundation for a dignified retirement, then the triple lock can be removed in exchange for a more sustainable earnings or inflation link.”

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