Triple lock retained: what does the Spring Budget mean for pensioners?

Pensioners have historically been a reliable source of votes for the Conservatives come election time. But did Jeremy Hunt forget to doff his cap to them in his latest fiscal update?

In his Spring Budget, Jeremy Hunt announced several new measures, which included a 2% National Insurance cut, changes to the child benefit charge, and the launch of a new British ISA. 

Pensioners would have been listening carefully to Hunt’s statement for any mention of the triple lock, a safeguard which protects the value of their state pension. He remained silent on this measure in his hour-long speech, but confirmed in the written document published afterwards that the measure would be retained. 

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Retirees will be glad to see this measure protected, having been much debated in the political arena in recent months. But few other concessions were made to them in Hunt’s latest fiscal update.

Against this backdrop, we look at the key measures announced. Should pensioners be disappointed by a budget that prioritised tax cuts for the younger working population?

What is the triple lock, and is it safe?

The triple lock is a measure that was introduced in 2010 to protect the value of the state pension. The government committed to raising the amount paid out each year in line with whichever measure is highest – inflation, earnings growth, or 2.5%.  

For pensioners, this is a valuable protection. Recipients of the state pension will see their payments increase by 8.5% from April this year given the high rate of inflation. 

The Conservatives renewed their commitment to the triple lock in this year’s full Spring Budget document, despite Hunt not mentioning it in his speech. Reports suggest the Labour Party is also planning to include a commitment to the triple lock in its general election manifesto. 

Despite this, the measure has come under fire from many in the political arena in recent months. 

In the current economic environment, critics of the triple lock say it is too expensive. Inflation has fallen from its peak of 11.1%, but remains high at 4%. 

Many also believe the triple lock places unfair financial pressure on younger generations at a time when they are already struggling with a heavy tax burden, higher rental costs, and higher interest rates (which have caused mortgage costs to soar for many homeowners).

What’s more, recent analysis from A J Bell has revealed that the UK state pension could pay out more than £13,000 a year by 2030, if the current rules remain in place. 

“Over the long-run, the triple lock simply isn’t sustainable in a country with an ageing population, given the State Pension is funded on a pay-as-you-go basis out of taxation”, says Jason Hollands, managing director of Evelyn Partners. 

“The dilemma is that no political party will want to bite the bullet on it. Ending the triple lock would be electoral suicide, especially for the Conservatives whose share of support is relatively high among retired voters”, he added. 

In Hollands’ view, “[r]eform of the triple lock is needed and would be best achieved by commissioning an independent review and set of proposals that could gather cross-party support”.

While the Spring Budget has safeguarded the controversial measure for now, it is unlikely to be the last we hear on it.

Are pensioners shouldering the tax burden?

Despite retaining the triple lock, critics of the Budget have argued that it has given concessions to millennials, while leaving pensioners worse off. 

Analysis from the Resolution Foundation reveals that, overall, “households headed by someone aged 18-45 will gain £590 on average, compared to an average loss of £770 for those aged 66 and over”.

Indeed, one of the key measures announced during the Budget was a 2% National Insurance cut. This tax cut won’t leave pensioners’ wallets any fatter, as it is only paid by those in employment. 

What’s more, income tax thresholds have been frozen, which means that thousands of pensioners could actually end up paying more tax from April. The state pension is due to increase by 8.5% in April, and this could push some pensioners’ overall income into a higher tax bracket. 

While retirees will be glad that the triple lock is safe for now, the irony that it is being funded by their own taxes won’t be lost on many.

What’s more, other key measures included changes to child benefit, and a commitment to future pot-for-life pension reforms. Again, the majority of these benefit people of working age. 

While pensioners will surely be happy for any children and grandchildren benefitting from the child benefit reforms, the measures are of little direct consequence to them. What’s more, they will cost the Treasury £3.12 billion over the next five years.

Similarly, pot-for-life reforms will impact those who are still in the workplace, by allowing them to take their pension pot with them when they change jobs. The hope is that this measure will avoid pension pots being forgotten about or lost.