Burnham faces mounting pressure to scrap pension triple lock

The warning from Nigel Green of deVere Group comes as the Office for Budget Responsibility’s latest long-term assessment concludes that Britain faces difficult choices over public spending, with an ageing population, rising healthcare costs and mounting debt placing increasing strain on the public finances.

The fiscal watchdog estimates that retaining the triple lock will cost around £15.5 billion more by the end of the decade than linking the state pension to earnings alone, while state pension spending could rise from around 5% of GDP today to close to 9% by the 2070s if current policy is maintained.

Nigel Green says the political commitment to protect the triple lock is unlikely to survive those fiscal realities indefinitely.

He says: “The triple lock has become politically untouchable, but economics has a habit of catching up with politics.

“I don’t believe the question is whether it eventually changes. The question is when.

“The pressure won’t disappear because governments wish it away. Britain is getting older, healthcare spending is climbing, defence demands are increasing and debt interest remains elevated.

“Every Prime Minister and Chancellor will be looking for room to manoeuvre, and the state pension will inevitably be part of that conversation.”

The triple lock guarantees that the state pension rises each year by whichever is highest: inflation, average earnings growth or 2.5%. Introduced in 2011, it has substantially lifted pension incomes and helped reduce pensioner poverty.

At the same time, it has become one of the fastest-growing long-term commitments on the government’s balance sheet.

The Office for Budget Responsibility has warned that demographic change alone will place sustained pressure on public finances over coming decades, with pensions and healthcare accounting for much of the increase in age-related spending.

Nigel Green believes those structural forces will become increasingly difficult for any government to ignore.

“Andy Burnham may honour the commitment during this Parliament. I think he’ll come under enormous pressure to rethink it in the next. Fiscal arithmetic doesn’t negotiate. If the government wants to preserve spending elsewhere without imposing ever-higher taxes, every major spending commitment comes under scrutiny.”

He continues: “History shows that no policy guarantee lasts forever. Governments adapt to changing economic conditions.

“Retirement planning built on the expectation that politicians will always preserve today’s promises is taking a risk that many people don’t fully appreciate.”

The deVere CEO argues that the debate extends well beyond politics.

He says: “This is really about financial resilience. Millions of people understandably see the state pension as a dependable foundation for retirement. It should remain an important part of retirement income, but it should never be the whole plan.

“If the triple lock is eventually diluted, replaced or redesigned, many retirees could discover that the income they expected simply doesn’t materialise. Waiting until that happens is the worst possible strategy.”

Private retirement provision is already under pressure. Automatic enrolment has increased workplace pension participation dramatically over the past decade, yet many households remain on course for retirement incomes well below their expectations, particularly if they rely heavily on minimum pension contributions.

The OBR has also highlighted inadequate private pension saving as a growing long-term fiscal risk alongside the rising cost of the state pension itself.

Nigel Green says: “This should be a wake-up call. People need to think beyond the state pension and beyond political promises.

“Building diversified retirement wealth through long-term investing has never been more important.

“The uncomfortable reality is that retirement security increasingly rests with individuals rather than governments.

“Public finances are under pressure across the developed world. Britain is not unique in this regard.

“People who act early have options. They have time for compound growth to work in their favour, they can diversify globally, and they can adjust their plans as circumstances evolve.”

He concludes: “The triple lock has provided valuable protection for pensioners. But prudent financial planning has never been about assuming today’s policies will still exist tomorrow.

“It’s always been about preparing for change before change is forced upon you.”
Andy Burnham, who is expected to become UK Prime Minister later this month, will be forced to scrap the triple lock on pensions and this should be a wake-up call for Britain’s retirement savers, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from Nigel Green of deVere Group comes as the Office for Budget Responsibility’s latest long-term assessment concludes that Britain faces difficult choices over public spending, with an ageing population, rising healthcare costs and mounting debt placing increasing strain on the public finances.

The fiscal watchdog estimates that retaining the triple lock will cost around £15.5 billion more by the end of the decade than linking the state pension to earnings alone, while state pension spending could rise from around 5% of GDP today to close to 9% by the 2070s if current policy is maintained.

Nigel Green says the political commitment to protect the triple lock is unlikely to survive those fiscal realities indefinitely.

He says: “The triple lock has become politically untouchable, but economics has a habit of catching up with politics.

“I don’t believe the question is whether it eventually changes. The question is when.

“The pressure won’t disappear because governments wish it away. Britain is getting older, healthcare spending is climbing, defence demands are increasing and debt interest remains elevated.

“Every Prime Minister and Chancellor will be looking for room to manoeuvre, and the state pension will inevitably be part of that conversation.”

The triple lock guarantees that the state pension rises each year by whichever is highest: inflation, average earnings growth or 2.5%. Introduced in 2011, it has substantially lifted pension incomes and helped reduce pensioner poverty.

At the same time, it has become one of the fastest-growing long-term commitments on the government’s balance sheet.

The Office for Budget Responsibility has warned that demographic change alone will place sustained pressure on public finances over coming decades, with pensions and healthcare accounting for much of the increase in age-related spending.

Nigel Green believes those structural forces will become increasingly difficult for any government to ignore.

“Andy Burnham may honour the commitment during this Parliament. I think he’ll come under enormous pressure to rethink it in the next. Fiscal arithmetic doesn’t negotiate. If the government wants to preserve spending elsewhere without imposing ever-higher taxes, every major spending commitment comes under scrutiny.”

He continues: “History shows that no policy guarantee lasts forever. Governments adapt to changing economic conditions.

“Retirement planning built on the expectation that politicians will always preserve today’s promises is taking a risk that many people don’t fully appreciate.”

The deVere CEO argues that the debate extends well beyond politics.

He says: “This is really about financial resilience. Millions of people understandably see the state pension as a dependable foundation for retirement. It should remain an important part of retirement income, but it should never be the whole plan.

“If the triple lock is eventually diluted, replaced or redesigned, many retirees could discover that the income they expected simply doesn’t materialise. Waiting until that happens is the worst possible strategy.”

Private retirement provision is already under pressure. Automatic enrolment has increased workplace pension participation dramatically over the past decade, yet many households remain on course for retirement incomes well below their expectations, particularly if they rely heavily on minimum pension contributions.

The OBR has also highlighted inadequate private pension saving as a growing long-term fiscal risk alongside the rising cost of the state pension itself.

Nigel Green says: “This should be a wake-up call. People need to think beyond the state pension and beyond political promises.

“Building diversified retirement wealth through long-term investing has never been more important.

“The uncomfortable reality is that retirement security increasingly rests with individuals rather than governments.

“Public finances are under pressure across the developed world. Britain is not unique in this regard.

“People who act early have options. They have time for compound growth to work in their favour, they can diversify globally, and they can adjust their plans as circumstances evolve.”

He concludes: “The triple lock has provided valuable protection for pensioners. But prudent financial planning has never been about assuming today’s policies will still exist tomorrow.

“It’s always been about preparing for change before change is forced upon you.”