A proposed change to the state pension system could leave up to 25 million pensioners with insufficient income, according to Sir Steve Webb, former Liberal Democrats Pensions Minister. The government faces increasing pressure to modify the Triple Lock—a policy ensuring state pensions rise annually by the highest of inflation, average earnings growth, or 2.5%. Replacing it with inflation-only (CPI) increases would significantly reduce pensioners’ income.
Describing the situation as “living in a fool’s paradise,” Sir Steve stresses the urgency of this issue. Stuart Earle, Partner at Eversheds Sutherland and chair of a recent pensions event, echoed concerns about the growing pension funding challenges. He noted the approaching increase in State Pension Age to 70 and highlighted that inadequate pension savings could pose a larger problem than currently recognized.
Legal expert Rebecca Howard from Pinsent Masons LLP provided insights on important pension components, including Pre and Post 1988 Guaranteed Minimum Pensions (GMP), bridging pensions, and the impact of state pension offsets and deductions.
Phil Warner from Dalriada Trustees gave an engaging history of pensions, tracing their evolution from early schemes like the Chatham Chest in the 1500s and the Poor Laws to the Old Age Pensions Act of 1908, which introduced non-contributory pensions payable from age 70 to those deemed “of good character.” He chronicled subsequent milestones: the establishment of State Pensions in the 1940s (aged 60 for women, 65 for men), the 1959 National Insurance Act linking state and occupational pensions, and their eventual separation by the 2014 Pensions Act.
With around 200 pension professionals attending, the event highlighted the complexity of pension systems and underscored the need for careful consideration before altering existing rules. Warner concluded that while state and occupational pensions influence one another, it remains simpler to manage them as separate systems.