STATE PENSION payments are important to millions, and many rely on the Triple Lock mechanism to increase their sum. However, the government has been urged to ditch the sum, as it could be more cost effective to do so.
State Pension payments are available to Britons who have put forward a set amount of National Insurance (NI) contributions, and who have reached an eligible age. The sum proves particularly valuable for retirement, helping people with the costs associated with later life. As such, the Triple Lock Mechanism has functioned as a guarantee the sum will rise each year, protecting pensioners’ income.
However, one leading international organisation has urged the government to rethink the policy, due to the costs involved.
The OECD, otherwise known as the Organisation for Economic Co-operation and Development, has highlighted issues surrounding the policy and its functions.
A report published this week warned costs associated with Triple Lock could potentially put a significant strain on the British economy.
The report read: “Population ageing is putting pressure on public finances.
“Indexing state pensions to average earnings rather than using the triple lock would improve sustainability.”
The state pension Triple Lock provides certainty to pensioners that their sum will rise annually.
After first being introduced by the coalition government in 2010, it became a flagship policy for the Conservative Party in the most recent December 2019 general election.
Triple Lock means the state pension sum rises at the start of each tax year by whichever is the highest out of earnings growth, inflation or 2.5 percent.
This year, the state pension sum rose by 3.9 percent in line with average earnings growth.
However, as a result of high levels of spending due to the COVID-19 crisis, many have suggested the government could attempt to recoup costs by making alterations to the mechanism.
Fears that costs could end up spiralling out of control have been a particular concern for some, as the economy attempts to get back on its feet.
The report from the OECD went on to suggest alternative options needed to be considered, to ensure certain groups were protected.
It continued: “Pension reforms should ensure that adequate support is provided to poorer pensioners.
“Once growth has firmed, broadening the tax base would support social objectives, such as health, while raising equity.”
At present, the full new state pension sits at £175.20 per week, with pensioners expecting to be paid once every four weeks.
The government, however, has so far resisted calls for the Triple Lock to be ditched.
Chancellor Rishi Sunak has recently provided Britons with reassurance their sum will be protected.
Speaking on LBC, Mr Sunak said the government planned to keep the policy.
He said: “Yes, our manifesto commitments are there and that is very much the legislative position.
“We care very much about pensioners and making sure they have security, and that is indeed our policy.”