"If, for example, we went into a period of deflation where everything, both earnings and prices, was falling then putting pensions up 2.5% is a bit out of all proportion."
In an interview with the Observer, Altmann said: “Absolutely we must protect pensioner incomes, but the 2.5% bit doesn’t make sense. If, for example, we went into a period of deflation where everything, both earnings and prices, was falling then putting pensions up 2.5% is a bit out of all proportion. Politically nobody had the courage to stand up and say we have done what we needed to do.
“The cost of the triple lock on the public finances from 2020 onwards is enormous. And if you reduce it to a double lock you save billions of pounds.”
The Government has since confirmed that it has no plans to remove the triple lock ahead of 2020.
A DWP forecast of the cost of the Triple Lock in July 2011 indicated that it could be as high as an extra £45 billion by 2025/26.
Tom McPhail, head of retirement policy at Hargreaves Lansdown, supports Altmann's view, stating: “The triple lock was never going to be sustainable in the long term and for as long as it exists, it will divert an ever increasing share of government spending towards pensioners, at the expense of the working population. A balance always needs to be struck between protecting the standard of living of pensioners, and not over-burdening taxpayers. There is a strong case for using a dedicated pensioners’ RPI measure for inflation-proofing the state pension, rather than either a triple lock, or the double lock proposed by Ros.
"A review of state pension inflation-proofing policy could throw other elements into the mix. Next year sees a long-scheduled review of state pension ages. There is an argument for raising state pension age faster, modifying the triple lock and at the same time further increasing the level of the state pension. The new single tier state pension is worth around £8,000 a year; if this could be pushed up nearer to £10,000 a year, then having to wait a couple more years to receive it and sacrificing the triple lock might be acceptable compromises.”
However Kate Smith, head of pensions at Aegon, argues that "the State pension is the bedrock of many people’s retirement incomes and to give pensioners certainty, Government should not make mid-term changes to commitments such as the triple lock.
Aegon says it welcomes the Government’s confirmation that it has no plans to remove the triple lock ahead of 2020.
Smith added: “Nine years of ‘triple lock catch up’ by 2020 will be a very valuable benefit to pensioners, but clearly, the more its value, the greater its cost to the Government and taxpayers. Considerations around state pension increases should be reviewed every 5 years on affordability grounds and to make sure the Government is allocating finite resources fairly between generations.
“People need trust in state pensions so they can determine how much they need to save in addition to meet their retirement aspirations. It’s important that state pension policy is fixed for at least five years, and in some regards for far longer, giving certainty to pensioners and savers alike.”
