Many say the triple lock has been too successful, and the government can no longer afford it as it costs the country billions. Yet in practice, it hasn’t gone far enough to help the poorest pensioners, as new research shows their net income has risen by just £1 a week after costs since the mechanism was introduced in 2010.
Scrapping the triple lock, which increases the state pension each year either by either earnings, inflation or 2.5 percent, would be a hammer blow for the poorest pensioners.
The wealthiest pensioners would get by as they do not rely solely on the state pension in retirement. Typically, they have other sources of retirement income, such as company and personal pensions, investments, savings, rental properties, and so on.
It’s the worst off pensioners who urgently need the triple lock as the gap between rich and poor continues to widen, new research shows.
The bottom fifth of pensioners saw their net income grow by just £208 a year between the 2010/11 tax year and 2022/23 tax years.
That’s a rise of just two percent a year, which works out as a meagre £4 a week, according to new analysis of DWP data from benefits consultancy Broadstone.
However, once housing costs are also taken into account, they are getting just £1 a week extra. And their plight would be even worse without triple lock increases, which have helped the state pension keep up with prices.
It’s a different story for those fortunate enough to have workplace and personal pensions, and other forms of retirement savings such as tax-free Isas or part-time jobs.
The top fifth of pensioners saw their annual income grow by a far more impressive nine percent a year over the same period.
That’s the equivalent to £2,860 a year after housing costs, which works out as an extra £55 a week instead of just £1.
It’s a staggering difference, and shows the importance of saving for retirement under your own steam, rather than purely relying on the state to provide.
Damon Hopkins, head of DC workplace savings at Broadstone, said: “These figures show that the gap between the ‘haves’ and ‘have-nots’ in retirement has widened sharply.”
Hopkins said life is particularly tough for single pensioners. “They must cover all of their household bills from a single income, but have barely seen any increase over the past 10 years.”
The triple lock is not enough on its own. “Despite triple lock increases to the state pension and increases to other benefits, it is clear that more people are entering retirement with inadequate savings.”
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The bottom fifth of pensioners get 88 per cent of their gross income from the state pension and benefits, having little or no personal pension or savings of their own.
In contrast, the top fifth only get a third of their total retirement income from the state pension and benefits. The remaining two thirds comes from workplace and personal pensions, savings and earnings income.
Hopkins added: “This demonstrates the urgency of policy to get savers putting more into their pension pots.”
The average single pensioner’s income is less than £17,000 after housing costs, around half the £31,300 needed for a moderate living standard, according to the Pension and Lifetime Savings Association.
Hopkins said pension savers need to consider how much income they need in retirement, and whether their current pension contributions are enough to achieve it.
He added: “Our message to those struggling would be to seek help from sources like Citizens Advice, government-backed Pension Wise or their local council.”
Younger savers should see this as a wake-up call to save more for retirement. While triple lock critics should consider how much harder life would be for the poorest pensioners if it was scrapped.
