The triple lock on state pension increases should be dropped because 'pensioners have it easy' when compared with young people, according to the Liberal Democrat leader in the House of Lords.
Speaking to New Model Adviser® at the Liberal Democrat conference, Richard Newby said the party should rethink its support for a policy that it defended in the run-up to June's general election.
'I think it will be difficult to maintain because of the money, and also the fact that over the last parliament, when the triple lock came in, the consequence was that pensioners were doing better than any other group,' Newby said.
'That was great, and enabled the value of pensions to come back up after it had been eroded. I think the debate now is of intergenerational equity. At the moment, pensioners have it easy compared to young people.'
The triple lock ensures the value of the state pension increases by the highest of wages, inflation or 2.5% every year. It was criticised before last year's election, and reports suggested the Conservatives would scrap if the party won a majority.
Although the Liberal Democrats previously supported the policy, Newby said the UK's slower wage growth in recent years posed 'a very difficult' question about the future of the pledge.
'That wasn’t the scenario when the triple lock was devised. Its purpose was to stop pensioners falling behind those in work, and now, the triple lock has had the opposite effect in making pensioners do relatively well in terms of real incomes compared to people working.’
Newby added: 'Nobody is suggesting pensions should be frozen, but I think people will be looking for a policy that achieves what the triple lock was set up to achieve, which is to ensure that pensioners got a fair deal and didn’t fall behind.’
Newby’s calls for compromise echo those proposed by Royal London policy director, and former Liberal Democrat pensions minister, Steve Webb ahead of the general election.
In a manifesto published by Royal London, Webb called for a 'middle way' approach which would preserve the triple lock for those who have already retired, but change the increase to earnings for those who have yet to retire.
‘I am still in favour of a phased withdrawal,' Webb told New Model Adviser® today. 'In 2010 a lot of people were getting very poor state pension values, and nowadays they are valued at around £8,000 a year, so someone who retired on that and a company pension now would be considerably better off than many in work.
'Keeping the triple lock for older pensioners but not for the newly retired, who have a decent state pension and don’t need the increases would make the most sense.’