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Press comment: A double lock won't fix the eroding social contract

18/05/2017

If you are covering the Conservative Party’s manifesto pledge to replace the triple lock with a double lock, please see the following comment from Jon Greer, head of retirement policy at Old Mutual Wealth:

Jon Greer“The Conservatives have taken a bold step in committing to replace the triple lock. The main issue with the triple lock is that it guarantees the state pension will rise by 2.5% no matter what. The double lock removes this ratchet effect however, the state pension will still rise faster than both earnings and prices in the long run, because of inflation, according to projections from the Office for Budget Responsibility

“If the government really want to ensure the social contract between generations remains intact, which they dedicated an entire chapter to, they will need to take a tougher stance on this political hot potato.

“The Conservatives should have heeded the recommendation of a ‘smoothed earnings link’ from the Work and Pensions Select Committee. This means growth in pensions continues, but when earnings fall behind price inflation, an above earnings increase could kick in until either earnings growth resumes or for as long as the pension remains above a previously established limit compared to average earnings. When this happens it would revert to earnings.

“This would ensure that the state pension rises in line with earnings rather than faster than earnings, but also protects pensioners when earnings fall.

“The debate about the state pension is a question of who pays and how much. We operate under a ‘pay as you go system,’ so instead of saving for your own state pension, you fund the pensions of current pensioners. This means the more generous the terms, the greater the funding required from current workers.

The IFS has revealed that pensioners have seen their average income grow nearly 15 percent since 2007/08 thanks to the triple lock. Meanwhile, young adults have only just started to recover median income levels last seen before the recession. The future affordability of the state pension will not be eased by a double lock and that fact is likely to exacerbate the growing issue of intergenerational inequality.”

For more information contact

Kathleen GallagherOld Mutual Wealth023 8072 629307990 004932kathleen.gallagher@omwealth.com

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

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; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• The private client advisers business is now Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

This press release is for journalists only and should not be relied upon by financial advisers or customers.

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This communication is issued by Quilter plc.  Registered office: Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ, United Kingdom. Registered number: 6404270.  Registered in England.