Paul Maynard – Why pensions adequacy risks becoming nobody's problem - Professional Pensions
By Google News Personal Finance ·
I am sure you know this. I am hardly the only one to write the above paragraph. But the ‘why' really matters. Note the fact that even the prime minister's language by the day after his speech had shifted to ‘adjusting the triple lock' – implying, indeed, that a triple lock will still exist.
So yes, the current government is now going to legislate to downgrade the triple lock to whichever is the higher of either CPI inflation or 2.5%. The earnings lock, at least in legislation, will no longer be relevant. The Institute for Fiscal Studies (IFS) stresses that the biggest contributor to the ratchet effect of the triple lock has been removed by taking this step.
But we're forgetting the politics. Look at petrol. Every year the Office for Budget Responsibility forecasts do not take into account the freeze in petrol duty – because it is a temporary freeze. Yet everybody knows that, due to political pressure, chancellors have fought shy of initiating any increase knowing the public outcry that will ensure. That would be as nothing when hybrid drivers like me find themselves paying twice for those miles they drive when the engine rather than the battery is engaged, mind you!
Similarly, chancellors will face immense media speculation in the run up to any budget when earnings growth exceeds CPI or 2.5%. The tabloid newspapers will say pensions are being cut if earnings growth is ignored. Restive backbenchers will rise up. The argument that it will even itself out in the long run will cut no mustard. Analysts will need to decide whether any prime minister feels powerful enough and strong in the polls to withstand the fury.
Even if we get greater clarity over what time frames and review points will be used to assess whether an earnings link overall has been maintained will not…
Originally published by Google News Personal Finance
