Margaret Thatcher began her pension reforms with the Social Security Act of 1980. This saw the correlation between average earnings and state pension increases severed, with the aim to reduce public spending. Pensions were treated like unemployment and sickness benefits (generally accepted as being short-term in nature) and increased in line with inflation.
Inevitably this meant that the value of state pensions, like other “benefits” reduced over time and the UK system is now one of the least generous, when compared with average earnings, in the developed world. Despite great pressure from people like Barbara Castle, the Labour governments from 1997 – 2010 did nothing to reverse this. The “triple lock” (meaning that pensions should rise by, inflation, average earnings or 2%, whichever was the greatest) was introduced by the Cameron-Clegg government in 2011 as a way to try to redress this and, unless I’m misreading her, Theresa has not ruled out, indeed has hinted at, its abolition.
It is said that Britain cannot afford even this niggardly pension due to the rise in the number of people annually reaching retirement age, and their propensity, having reached it, to live much longer than they used to. It is true that pensions cost over £100 billion a year, and that due to mismanagement of finances over the years, not a single penny of this is “funded”. In short, it has to come out of current taxation. Apparently, no one had the foresight to account for the inevitable ageing of the baby boomers or, despite it being a gradual process, the lengthening of life expectancy.
Of course, the pension age is rising to 66 by 2020, and then to 68 by 2028… and presumably on an ever upward trajectory as life expectation rises. But this will make little difference to the overall cost, as vast numbers of 60+ people are unemployed and although life expectancy has increased, people are not necessarily proportionally healthier as they grow older.
I was somewhat surprised to see the Express’s front page story about Mrs May being more popular than any other prime minister since Churchill on the basis of her pensions pledge. I thought what she said was pretty ambiguous.
Of course pensions will rise. Even under Mrs Thatcher they rose. But Hammond has hinted that they may be subject to the same sort of restraints as other benefits…ie a reduction in real value.
All is not lost though. If you wish to do well as an OAP you could do worse than become an MP. They seem to have received generous pay increases in the recent past, and of course, at £300 a day, a peer of the realm is well rewarded for snoozing his life away.