A minister fuelled doubts about the future of the state pension ‘triple lock’ today – insisting the focus should be on boosting private provision.
Torsten Bell insisted the policy reflected Labour‘s desire to increase the payments ‘slightly’ relative to average earnings.
But giving evidence to MPs, he said that was being ‘delivered’ over the course of this Parliament, with spending due to rise by £30billion.
In future he suggested the ‘biggest gaps’ would be in private pensions, and that was the area where they would be looking ‘really hard’.
Mr Bell said that more over-50s needed to be in the jobs markets, saying the numbers on NHS waiting lists were ‘horrifying’.
The MP, who is seen as very close to Chancellor Rachel Reeves, also told the Work and Pensions Committee that he thought ministers had been too ‘relaxed’ about the impact of state pension age increases in the past.
Torsten Bell insisted the ‘triple lock’ policy reflected Labour’s desire to increase the payments ‘slightly’ relative to average earnings
A government review published last March indicated that if life expectancy returned to the trajectory expected in 2014 the state pension age could be 71 by the late 2050s
The ‘triple lock’ has been in place since 2011, and means the state pension rises annual by the highest out of inflation, average earnings or 2.5 per cent.
That has resulted in increases significantly outpacing the rest of the economy, particularly during spikes in inflation. The rate is due to go up by 4.8 per cent from next month.
Labour has committed to keeping the lock for the duration of this Parliament.
However, think-tanks such as the IFS have raised concerns about the burden on the Treasury, with the finances under increasing pressure.
Proposals for change have included setting the state pension at a fixed proportion of average earnings, or moving to a more limited ‘double lock’.
Mr Bell stressed there was work being carried out on how to ensure people had an ‘adequate’ income in retirement.
He said: ‘In terms of the government’s revealed objective, it is that we want to see a slightly higher level of the state pension relative to earnings…
‘Which is what’s being delivered by the maintenance of the triple lock over the course of this Parliament.
‘That’s the £30billion increase in state pension expenditure over the course of this Parliament.
‘Then that has to be seen in the round with the Pension Commission work, where they are explicitly looking at how we think about adequacy.’
Mr Bell pointed out that there were projections that private pension income would be lower in 2050 than in 2025.
‘You can see what the overall objective is on the state pension,’ he said.
‘I think the challenge is if you look at either overall adequacy or the inequality issues that the chair has rightly raised it’s on the private pension side where you see the biggest gaps today.
‘That doesn’t mean we shouldn’t be looking at all of it… but we’ve got to look really hard at where we are on the private pensions.’
Mr Bell said problems had arisen in the 1980s when the state pension was ‘decoupled’ from earnings. That was a problem because ‘the relative income of pensioners falls back relative to the population as a whole in periods when you were seeing fast wage growth’.
Mr Bell has previously criticised the triple lock, saying it was ‘not a sensible mechanism’ when he was head of the Resolution Foundation think-tank.
He said today that employment rates for older people needed to increase, flagging ‘horrifying’ waiting lists.
Look across other countries, a higher employment rate for over-50s ‘is possible and in lots of cases desirable’.
‘If you look at the number of 55-pluses on NHS waiting lists we should all be horrified, we should absolutely be horrified,’ he said.
‘It’s all well and good shouting at people saying everybody should be working while you watched waiting lists rise year after year after year.
‘They are obviously falling now in England and Wales, sadly not in Scotland…’
The minister also seemed to pour cold water on the prospect of quicker state pension age rises.
The pension age is already slated to reach 67 between next month and 2028.
Currently the legal position is that it will reach 68 from 2044-46.
However, a previous report by former Tesco director Baroness Neville-Rolfe cautioned that might need to be accelerated.
With the triple lock in place there are estimates the level would have to hit 74 by 2068–69 in order to maintain spending at around 6 per cent of GDP.
Committee chair Debbie Abrahams challenged Mr Bell that life expectancy had been increasing much more slowly for lower income households, saying it had actually fallen in her Oldham constituency.
The minister said ‘a lot’ of weight would be put on the needs of those who were not benefiting from wider improvements in life expectancy.
‘If I take the long view… state pension increases have been going on for different reasons since the early 1990s,’ he said.
The IFS has highlighted that maintaining the state pension at current levels relative to earnings would mean increasing the proportion of GDP spent on it
‘There’s obviously to some degree a consensus that as you see increases in longevity there will be consequential changes in the state pension age to some degree.
‘I think sometimes what that has flipped into too easily into is being relaxed about that, not weighing that.
‘You can take seriously the need to support people working into later life while taking very seriously the consequences in the distributional…
‘If I was looking at the changes in 2011 for example and some of the comments I saw from then-ministers after very fast accelerations of SPA… I would say they weren’t weighing seriously enough those consequences in the way they went about it.’