UK pensions: Actuaries slam idea of triple lock, saying protecting pension provision for future generations depends more on better financial education

 
Hayley Kirton
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Maintaining triple lock could "create an unnecessary drain on the future workforce" (Source: Getty)

Actuaries have today cast doubt on the government's key mechanism for calculating state pension.

Responding to the Work and Pensions Select Committee’s inquiry on intergenerational fairness, the Institute and Faculty of Actuaries (IFoA) has said that triple lock is not only unnecessary but would also place an unfair burden on workers in the future.

Under triple lock, basic state pension is increased each year by the higher of earnings growth, inflation or 2.5 per cent.

Instead, the IFoA has argued that government would be better off focusing on aspects like creating a sustainable social care framework and improving financial education, so people understand how long they are likely to be retired for and, therefore, how much they need to have set aside.

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"The triple lock was important as a temporary measure after the link of state pension to earnings was restored in getting it to a level that is fair in relation to wages," warned Colin Wilson, president-elect of the IFoA. "However, based on current economic trends, the triple lock will increase expenditure on the state pension as a share of GDP over the long term and will create an unnecessary drain on the future workforce."

The select committee inquiry into intergenerational fairness, which was opened last month, is due to close tomorrow.

Wilson continued: "To achieve intergenerational fairness it is important that the current workforce is not unnecessarily burdened with funding State benefits which will likely not be as generous when they retire."

However, George Osborne had already promised to maintain triple lock for the remainder of this government's term at last November's Autumn Statement.

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Just one month before the chancellor is due to deliver his Budget, the actuaries also warned that constant tinkering with the pensions system had led people to feel uncertain about what future generations were likely to receive.

However, while it is not known what Osborne will say about pensions next month, what is known is that he will almost certainly say something. In the Autumn Statement, it was revealed that the chancellor would reveal its response to a consultation on pensions tax relief in the upcoming Budget.

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