The Government may find reviewing the safeguard “irresistible” as it struggles to protect the rest of the population from the economic impact of coronavirus, former pensions minister Sir Steve Webb said. State pensions go up by at least the inflation rate in September, growth in earnings or a minimum floor of 2.5 percent.
But inflation has tumbled since lockdown was imposed and experts believe it could be negative by autumn.
Sir Steve Webb, a partner at pension consultants LCP, said pensions may be hit when Chancellor Rishi Sunak is looking for ways to save cash.
“From the government’s point of view, a period of negative inflation when prices are actually falling would be the ideal time to justify not sticking to the 2.5 percent floor implied by the triple lock,” he said.
“Once the rule had been broken once, it would be more likely to be abolished for future upratings.”
He added: “In economic terms, the working-age population is likely to have felt most of the pain of the current crisis, and could also be hardest hit by any tax increases to cut the deficit.
“Against this backdrop, the Chancellor is likely to be looking for the best time politically to make sure that the pensioner population contributes to restoring the public finances.
“A time when prices are falling could be the perfect opportunity for the Chancellor and he may find the temptation to tackle the triple lock to be irresistible.”
The Consumer Prices Index 12-month rate of inflation was 0.8 per cent in April, down from 1.5 percent in March.
Office for National Statistics figures released last week suggest that the under-30s have been particularly badly hit by the squeeze on incomes during the lockdown.
Across households generally, 53 percent of usual spending covers essentials such as food and housing costs, the ONS found.
But in homes where the householder is under 30, 58 percent of the weekly budget typically goes on essentials – potentially leaving this age group with less scope to cut back on spending.
Among homes where the householder is 65 to 74 years old, 43 percent of the budget typically goes on essentials.
Published at Sun, 14 Jun 2020 23:01:00 +0000