Labour manifesto: State pension needs to be slashed by £800 a year to balance the books, says expert

 
Oliver Gill
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Labour leader Jeremy Corbyn wants to keep winter fuel allowance and free bus passes kept as universal benefits for pensioners (Source: Getty)

A victorious Labour government would need to cut the state pension by £800 a year in order to balance the books on other retirement promises, a leading pension expert said today.

After being leaked on Wednesday evening, the Labour manifesto has pledged to cap the state pension age at 66.

Plans currently in place will raise the retirement age to 67 between 2026 and 2028 and to 68 between 2044 and 2046.

Yesterday, former Lib Dem pensions minister Steve Webb said the Labour promise would cost the exchequer an eye-watering £300bn.

Read more: Corbyn says Labour's manifesto has been unanimously approved

Meanwhile today, pensions expert Tom McPhail said the only way of negating the cost of Corbyn's plans would be to slash the payouts to pensioners.

He said: “You have to put these numbers in context: the state pension costs around £100bn a year and these projections roll out over the next 30 years, so this analysis involves a total cost in today’s money of around £3 trillion.

In other words these Labour proposals would increase the state pension costs by around 10 per cent. If you want to freeze the state pension age at 66 and keep the changes cost neutral, you’d have to cut the state pension for every individual from £8,000 a year to around £7,200.

Labour's proposals come after a government commissioned report concluded the timetable to increase state pension age needs to be brought forward.

In March, John Cridland said the rise in the state pension age to 68 ought to be implemented between 2037 and 2039.

Read more: The state pension shake-up: what the experts say

Cridland's report advises the government on policy rather than directly shaping it. It also concluded the pensions triple lock should be axed "in the next parliament". At the time, this was presumed to mean after 2020.

Labour's manifesto guaranteed to keep the triple lock, a mechanism that increases state pension payments at the higher of inflation, average earnings or 2.5 per cent, throughout the next parliament; or that it is kept at least at 2.5 per cent.

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