State pension triple lock ‘needs reform’ and payment should be ‘means-tested – report | Personal Finance | Finance
State pensioners are set to secure a 10.1 percent increase from April 2023 onwards as the triple lock offers a bumper boost. While the news was welcomed by many older people, some have hit back to suggest the policy is not sustainable in the long term.
A new report from the Adam Smith Institute suggests the state pension system needs to be reevaluated – particularly as it relates to the triple lock.
The report’s authors argued a reform of the long-standing policy would “prevent above-earnings ratcheting, while retaining inflation protection”.
Describing the triple lock as “inflexible by design”, the report states the mechanism has “resulted in a significant boost to pensioner benefits over working age benefits”.
For this reason, the authors believe the policy is “unfit for purpose” and needs to be looked at again to ensure less “disparities” between those of working age and pension age.
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As a consequence, the report also suggests means-testing for the state pension should be introduced.
It cites rising life expectancy since the mid-19th century as a reason for doing so, as a longer retirement requires the state pension to be paid out over a longer period, thus costing the Government more.
While raising the state pension age to reduce this liability is usually a course of action, the report suggests such a move is “highly regressive”.
Instead, it continues: “It would therefore be more equitable to begin means-testing the state pension instead of further raising the state pension entitlement threshold.
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“This is not to suggest that pensioners can’t be in poverty, or in need of welfare, however, the average pensioner has had comparatively generous welfare adjustments over the last 10 years.
“The state pension is effectively a universal benefit, funded out of general taxation and applied to almost all pensioners.
“Where most other benefits are targeted towards those who need it the most and adjusted as those needs fluctuate, the state pension applies equally to those in multi-million pound homes with generous final salary private pensions, as it does for the poorest pensioners, who might face a choice between heating and eating.”
Ultimately, the report suggests the state pension should no longer be a “near universal” payment.
Instead, the authors suggest offering payments only to those with asserts under £1million.
It has been argued this would save the taxpayer roughly £25billion per year.
While the report says such changes might be controversial, a “transition” could be implemented, with a number of options potentially reviewed.
A DWP spokesperson told Express.co.uk: “The UK state pension continues to provide the foundation for retirement planning and financial security in older age, with the full yearly amount of the basic state pension now over £2,300 higher than in 2010.
“Alongside this, Automatic Enrolment has succeeded in transforming private pension saving, with latest figures showing more than 10.7 million workers have been enrolled into a workplace pension to date and an additional £33 billion, in real terms, saved in 2021 compared to 2012.”
