"Even after years of the triple lock, the state pension is still lower than in 1979 relative to earnings: In 2010, the coalition government decided pension benefits had fallen too far behind other benefits and, with many pensioners living in poverty, it introduced the ‘triple lock’ guarantee to increase state pensions by the best of prices, earnings or 2.5 per cent."
According to Altmann, since 2010, the basic state pension has recovered somewhat, but is still only worth 19 per cent of average earnings, while the new state pension is worth 24.8 per cent (ie. both still below the 1979 level).
She highlighted figures from the Pensions Policy Institute to show the state pension as a percentage of net average earnings.
State Pension as a percentage of Net Average Earnings
1979 26%
2010 16.3%
2020 19% (New State Pension 24.8%)
Source: PPI/Ros Altmann
Altmann continues: "It is important that we do not keep using pensions as a political target to raid. Stability and protection are so important for our older generations. Abandoning the earnings link sets a dangerous precedent.
"The nation has a hugely divided pensioner population. Some may be very well-off, but millions are not, and the state pension is less than a quarter of average earnings. The oldest pensioners tend to be the poorest and the majority of these are women."
Webb appears to agree that stability is a vital component of pensions policy; even if the triple lock is not the most effective or sensible mechanism, pensioners, need to have some certainty about rising state pension incomes.
He explains: "The issue with any change to the formula is not really the single-year effect but the compound effect; the clearest example of this would be the period from 1980 to 2010 when the basic principle was a price link.
"Three decades of price-linking seriously eroded the value of the state pension relative to the average wage; similarly, as women tend to be retired for longer than men, any long-term change to the formula for state pension uprating will affect them more."
But even where there is significant pensions uprating, Webb suggests men would still benefit more than women.
He says: "One tricky thing about pension uprating is that it is pro rata to what you are already getting. Although the new state pension has (nearly) equalised outcomes for men and women, the old state pension has big differences – and most of today’s pensioners are on the old system.
"Therefore, any given percentage increase will therefore pay more in cash terms to men than women."
Fairness for all?
As questions over the fairness to younger workers have been raised in response to the headline 8.8 per cent earnings growth figures, Webb says it is "crucial to remember that today’s workers are tomorrow’s pensioners.
