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State pension warning as triple lock slammed as ‘daft policy’

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The triple lock policy guarantees state pensioners get a pay increase each year in April when the new tax year starts.

The pledge means payments must go up in line with the highest of 2.5 percent, the inflation figure for the previous September or the rise in average earnings.

Analysts doubt if the policy is sustainable, particularly after the inflation element was temporarily suspected two years ago, after the coronavirus lockdown led to a distorted increase in average earnings.

The policy was reinstated for this April, with state pensioners getting a record 10.1 percent payment increase.

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But many experts are concerned the policy will soon need to be changed. Scott Gallacher, chartered financial planner at independent financial advisers Rowley Turton, said: “Whilst an unpopular opinion, the triple lock is a daft policy.

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“As shown during Covid, it creates situations where state pensions can rise considerably higher than wages or even inflation.

“And, at some point, it has to be removed or at least modified. Otherwise, if it were followed indefinitely, you’d eventually end up with a state pension higher than average earnings.

“This might be attractive but would be entirely unaffordable. If pensioners do need additional financial help, it should be targeted by needs and not simply an almost random result of market conditions.”

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The basic state pension is currently £156.20 a week while the full new state pension pays £203.85 a week.

Independent financial adviser Samuel Mather Holgate, from Mather and Murray Financial, said the policy was never intended to last this long and is “completely unsustainable”.

He said: “Downing Street have a difficult job of balancing pension income with pension age, and as income has increased the age at which you achieve this is pushed further back.

“The fairest way to distribute state pension would be means testing it, but that would not go down well with those that vote and choosing a level to taper would be crucial.”

Neil Rayner, head of advice at True Potential, said making the state pension means tested would involve huge changes to the policy.

He said: “It would introduce complexity and administrative burdens, and it may discourage some individuals from saving for retirement.

“Many also believe that a means-tested state pension would be inherently unfair. Many people on higher salaries would have paid in more through higher National Insurance contributions, but would then receive less from their state pension in return.”

David Robinson, co-founder and wealth manager at Wildcat Law, said the state pension is unsustainable in its current form.

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He said: “With an ageing population and low birth rate, fewer working people are having to support more and more retired ones.

“In an age where working people are being told to accept that they are ‘poorer’ it is neither fair nor socially sustainable for pensioners to be shielded from this.”

Mr Robinson suggested bringing in a means-tested policy as an alternative. He explained: “We use means testing for so many other forms of state payments already that this would not only be feasible but rapidly achievable.

“We simply cannot have a situation where some of the poorest in society are working to support some of the richest in society via pension payments.”

With the future of the state pension looking uncertain, Mr Rayner urged Britons to make sure they have other sources of retirement income.

He said: “Without a private pension or significant savings, people may struggle. It’s best to think of the state pension as more of a safety net, rather than a complete source of retirement income.

“Consulting with a qualified financial adviser who can provide personalised advice based on your specific circumstances is always the best step to take if you have any concerns or need to plan things out.”

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.

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