Is the state pension triple lock affordable, and is it fair? - Sarah Coles

However, those who feel the triple lock is too generous will argue that by the time we get to April, a 7 per cent rise is likely to be way ahead of inflation. This may well be true. Inflation came in at 6.8 per cent for July, and is expected to drop further as we move towards April.

Yet it’s worth highlighting that this owes more to the timing of uprating than anything else. If you go back to April 2022, the state pension went up by 3.1 per cent, at a time when inflation was 9 per cent, so pensioners were massively disadvantaged by the delay. It may well be an argument for bringing the uprating measurement and the pension rise closer together, but it doesn’t always work in favour of pensioners.

Triple lock opponents could also point out that the same level of generosity hasn’t been offered to working people on benefits, who saw them frozen for years, and now only rise with inflation – putting them behind pensions in two of the past four years.

There is clearly a disparity here, but it begs the question of whether these rises ought to be levelled up or down.

When faced with the fact that the state pension is essential in protecting pensioners from living in poverty, those who oppose the triple lock could argue that child poverty is a far more widespread problem, that there are over four and a half times more people of working age in poverty than pensioners in the same position, and that pensioner poverty has fallen significantly from the levels in the 1990s. However, they would need to overlook the fact that there are still over 2 million people over the age of 65 living in poverty.

They might also add that as time goes on, and there are more pensioners per worker, it will mean the government is likely to hike taxes on working age people to pay for better pensions. This is absolutely true. It’s known as the old-age-dependency ratio – and it shows that the number of people of pensionable age for every 1,000 people of working age will rise from 280 in mid-2020 to 341 by mid-2045. This will have to be paid for somehow, and it’s difficult to see how taxes will avoid being part of the equation.

They could point out that as the triple lock gets increasingly expensive, it risks persuading the government that the only way to make ends meet is to increase the state pension age. This is easier to sell to an electorate, because you’re not taking anything away from them today – just discussing things that won’t change for around a decade. Cancelling the triple lock, by contrast, could damage the finances of state pensioners far more quickly.

If the triple lock is protected at the expense of raising the state pension age, it’s effectively locking out working people for longer, in favour of those who have already started drawing a pension. It means there will be more people who never live to draw their state pension, and there will be plenty more who aren’t able to work until their late 60s, who end up eroding their retirement savings far more quickly than they can afford to.

Those who support the triple lock, meanwhile, could argue that this is a price worth paying to secure a vital pillar in people’s retirement incomes. Regardless of what we’ve put aside for later life, we’ll have factored in a state pension, and making significant changes risks pulling the rug out from underneath pensioners.

At this time in our life, we have far fewer options for making income up elsewhere, which could mean millions of people are left high and dry. For those on very low incomes, the state pension is all that lies between them and an impossible struggle to pay the bills. Making changes could be devastating for some people in this group.

They might add that it’s in the best interests of all of us to ensure that the state pension is fit for purpose, whenever we are due to retire – whether it’s tomorrow or in 50 years’ time – so this is less of an intergenerational argument than some people think.

This is true, but it’s worth examining whether the triple lock is the right mechanism to put at the centre of making the state pension fit for purpose. When it was initially established, it was a clever technique designed to make up for years of effective pension cuts. Instead of an overnight hike, the mechanism ensured that it kept pace with inflation, and that in years of low inflation, the 2.5 per cent guaranteed rise meant it delivered a better income.

Now, over a decade after it was introduced, with so much ground made up, it’s worth revisiting. Making changes wouldn’t necessarily mean making the pension less generous. One option would be to use the opportunity to decide what constitutes a fair income, and then set that as the new flat rate state pension. That could then rise with inflation or wages and remain comparable.

Of course, this is a hugely sensitive issue, and there will be plenty of people who have read this with rising blood pressure. The triple lock is doing a sterling job of protecting pensioners, and if we see any changes, any replacement must achieve the same thing. Of course, with a general election looming, it’s also worth saying that no political party is going to want to touch this issue with a bargepole, so for the foreseeable future, pensioners can rely on the triple lock to continue unmolested.

House prices fall – in London

London is setting a fashionable trend that the rest of the UK may be doomed to follow. House prices in the capital have fallen in the year to June – for the first time since the market was effectively closed at the start of the pandemic. The country as a whole clung onto positive growth of less than 2 per cent over the past 12 months, but Yorkshire and the Humber saw higher price rises – at 2.7 per cent.

Unfortunately, even Yorkshire may not buck the trend as we move into the autumn. This set of figures reflect sales agreed as far back as March, and since then life has got tougher for buyers. Moneyfacts shows that the average 2-year fixed rate mortgage rose from 5.32 per cent at the beginning of March to a recent peak of 6.85 per cent at the beginning of August. This will take a toll around the UK, and there’s every chance that annual house prices will turn negative across the board.