“Working age benefits like child benefit and jobseeker’s allowance have been frozen, meaning that in real terms their value is declining every year by the rate of inflation. This disproportionality impacts low income households of working age that are more likely to be in receipt of these benefits and for whom they are likely to make up a larger share of total income.
“In contrast, the main retirement age benefit, the state pension, enjoys watertight protection from the corrosive impact of inflation. The triple lock guarantees an annual increase in the state pension of at least 2.5% even if inflation and wage growth is lower. As a result, we have seen a ratchetting up in the state pension because prices and wage inflation have been relatively flat. That protection seems incongruous at a time when working age benefits are being frozen, especially when retired households have seen their financial position improve relative to younger generations.
“The average value of benefits received per household decreased more than 10% in real terms when the state pension is excluded. That illustrates there is a big divide in the treatment of retired household’s benefits.Any government faces a difficult challenge here.
“Many retired households are highly dependent on the state pension as a source of income and curbing growth in state pension benefits is unlikely to be popular with older voters. That is why in recent elections the major parties have been reluctant to unwind the triple lock, even though it was only intended as a temporary measure to bring retirement incomes up. Over the long-term if it remains in place it will guarantee that retired household benefits will rise faster indefinitely.
“The important thing for individuals to recognise is that despite growth in retired household income over the last decade, this cannot last forever. Nobody should assume or take for granted that their own retirement is assured. The triple lock will eventually be removed and in any event, it is only designed to provide a base-level of retirement income. Only private pension savings will deliver the kind of prosperity in retirement that many of us aspire to.”