The coronavirus (COVID-19) pandemic is causing devastation across the globe, sadly seeing hundreds of thousands losing their lives, and even more losing loved ones. The crisis is also having an economic impact too, with the Government having needed to announce emergency measures such as the Coronavirus Job Retention Scheme and changes to Universal Credit in order to help people adversely affected.
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While some may worry about what the economic impact will mean for their private pension contributions, the state pension is currently still protected by the triple lock mechanism.
This means that both the basic and new state pension increases each year by whichever is the highest out of the average percentage growth in wages (in Great Britain), the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI), and 2.5 percent.
This April, the state pension increased by 3.9 percent, with this rise being tied to wage growth.
However, a think-tank has suggested that the coalition government policy should be scrapped as part of an “intergenerational reciprocation” for the costs of battling COVID-19.
The briefing paper “Intergenerational fairness in the coronavirus economy” from the Social Market Foundation (SMF) has warned that public sector net borrowing could rise above £200billion per year -higher than that seen in the financial crisis.
In the paper, the SMF has recommended that the triple lock mechanism is replaced with a “double lock” system.
According to the SMF paper, replacing the triple lock with the double lock mechanism could save around £4billion a year.
This would mean savings of around £20billion over the next five years.
“The ‘triple lock’ ensuring substantial rises in the basic state pension triple should be replaced with a ‘double lock’, tying increases to earnings or inflation (whichever is higher),” it suggested.
“This could contribute £20billion to deficit reduction over the next five years.
“Pensions would still rise, but less quickly, reducing the fiscal burden on the working-age population.”
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