Quote:
Originally Posted by Damien
I don't think it's the link to inflation that's the issue; it's that it will always rise by inflation, the average earnings growth or 2.5%. Whichever is higher.
So when inflation is higher than average, workers' wages increase, outpacing those increases, but when inflation is low, the wages used to pay for the triple-lock can't catch up, as the pension will go higher still.
It should be tied to a percentage of the average wage so that the tax base that pays for it can catch up during periods of low inflation and wage growth. Not forever taking a bigger and bigger percentage of the budget each year.
I would keep the triple lock until we reach a level that we're comfortable with as a country (it's low compared to some European nations even now), and then change how it works personally.
.
|
It's the different timing of things that cause the issues and extra costs. Eg inflation goes up to 10%, pension goes up by 10%. Months later, wages go up in response to the previous 10% inflation. But inflation has now dropped, so wage increases are higher than inflation. The pensions goes up twice over in response to the 10% inflation. Once for the inflation by itself, then again when wages respond, Overall wages may not have gone above inflation, but pensions have gone up above both of them.
Another example of the quirks of the calculations are why it had to be suspended during covid. Covid caused wages to drop, when the effect ended wages rose back up again. Should pensions have risen because of the rise of wages back to the previous level?