Press comment: Inflation stats show triple-lock is an easy concession in Tory-DUP negotiations | Old Mutual Wealth
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Inflation stats show triple-lock is an easy concession in Tory-DUP negotiations

13/06/2017

If you’re covering today’s inflation statistics, please see the following commentary from Old Mutual Wealth head of retirement policy, Jon Greer. He argues that rising inflation makes a Tory concession on the state pension triple-lock an obvious compromise in negotiations with the DUP:

Jon Greer“The triple-lock ensures pension incomes go up with inflation, earnings or 2.5%, whichever is higher. It means that state pension incomes are hard-wired to grow ahead of pay.

“In their manifesto, the Conservatives pledged to move to a double-lock, which would see pensions rise by earnings or inflation. They were the only party to commit to ending the triple-lock and the policy was designed to dampen the ratchet-effect of underpinning pension increases by 2.5%.

“But with inflation pushing beyond that level, there is no saving to be made by moving to a double-lock. With inflation running at greater than 2.5%, both the double and triple-lock would cost the same*.

“Over the longer term, retaining a triple-lock on state pensions will still mean future spending on retirement benefits will rise significantly. But in the immediate term, it means the Conservatives could concede ground on their double-lock policy with relative ease, making it an obvious concession in their current negotiations with the DUP.

“Over the long term, both the triple and the double-lock will see state pension spending increase. Even a double-lock would result in a £30bn increase over the next half-century, according to the Institute for Fiscal Studies.

“If there is no departure from the triple-lock it will ultimately place more pressure on future governments to address the state pension age. Preventing people from accessing a state pension until later in life is the alternative means of reducing the future cost of retirement benefits.”

*The 17/18 financial year uses September 2016’s figures to measure inflation (consumer prices index) and wages, meaning pension increases for this year are already set. Figures in September 2017 will subsequently inform state pension increases in 18/19. If inflation or average earnings are above 2.5%, state pension payments will increase by the higher of those two figures, regardless of whether or not a triple-lock, or double-lock policy is in place.

For more information contact

Michael GlenisterOld Mutual Wealth020 7778 963807469 144535michael.glenister@omwealth.com
Kathleen GallagherOld Mutual Wealth023 8072 629307990 004932kathleen.gallagher@omwealth.com

Notes to editors:

About Quilter plc:

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Quilter plc oversees £116.5 billion in customer investments (as at 30 June 2018).

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Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and the Multi-asset investment solutions business.

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• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

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• Quilter Cheviot will retain its name

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