The Institute of Fiscal Studies (IFS) has urged the Department for Work and Pensions to amend a state pension regulation that reportedly benefits wealthier retirees disproportionately. The state pension”s Triple Lock system, which was first established by the coalition government involving the Conservative Party and Liberal Democrats, has been criticized for favoring more affluent individuals.
According to Heidi Karjalainen, a senior research economist at the IFS, the current system tends to advantage those who are better off, particularly as it relates to the age at which individuals can access their state pension. Karjalainen explained that wealthier Britons, who generally enjoy longer life spans, are likely to reap the most benefits from the pension”s indexed increases. Conversely, those with lower incomes typically have shorter life expectancies and thus miss out on the advantages of the Triple Lock.
Karjalainen stated, “Raising the state pension age delays the point at which people can receive their state pension. This delay impacts poorer individuals more severely, as they, on average, have a lower life expectancy, making the loss of a year of state pension income more significant for them.” She further noted that wealthier individuals, who are likely to receive a well-indexed pension well into their 90s, gain relatively more from the Triple Lock.
The IFS has highlighted that the financial implications of the Triple Lock on public finances are considerable and increasing. As the population ages, spending on state pensions is anticipated to rise, with the Triple Lock contributing to these escalating costs. The method of indexing the state pension, which relies on the highest of three figures—two of which can fluctuate significantly—complicates future predictions of state pension expenditures.
Karjalainen suggested that reforming the system could lead to a “more sustainable and predictable” environment for both retirees and policymakers. She commented, “While the Triple Lock has played a role in enhancing the living standards of pensioners over the last 15 years, a more effective strategy is essential for the future.” Although the government has committed to maintaining the Triple Lock for the current parliamentary term, she believes transitioning away from it after the next election would be a prudent approach.
