UK govt defeated in HoL on state pension triple lock plans

The UK government has faced a defeat on the state pensions triple lock in the House of Lords after peers voted 220 to 178 to support an amendment to retain the earnings link.

As reported by our sister title, Pensions Age, the government announced that it was suspending the earnings element from the triple lock for 2022/23, after the impact of Covid-19 resulted in the measure becoming “skewed and distorted”.

However, the amendment would require the government to retain the earnings link element of the triple lock, although this would use an “underlying” earnings growth figure, which stripped out the effects of the pandemic, rather than the 8.3 per cent figure produced by the Office for National Statistics (ONS).

It was introduced by Baroness Ros Altmann, with support from cross-party peers, including Lady Wheatcroft, Lady Janke, and Lord Hain, in an effort to protect the poorest pensioners against rising earnings, focusing on “what sometimes seems like an underclass in British society: the poorest pensioners”.

Speaking in the House of Lords, Altmann stated: "Pensioner poverty was already rising even before the pandemic. It is a myth that pensioners are all well off.

"This measure is the biggest spending reduction or cost saving in the Budget. The Treasury will save £5.4bn in 2022/23, £5.8bn the year after, £6.1bn the year after that, and so on. This is money that is being taken away from pensioners.

"Too often, Chancellors have eyed state pensions or pensioners as a tempting target to raid when they need to find large sums of money. This is about large numbers of people, but for each person, we are not talking about large sums.

"However, this should not be about money. It is about people and the social welfare system. It is about trust in politicians and in our social welfare system as a whole. It is about millions of people who are often out of sight but struggling in 21st century Britain on the lowest state pension in the developed world.

"The pension credit level, which is lower than the new state pension, has not yet recovered to the level that the basic state pension sat at in 1979, when the earnings link was first removed. That started the whittling away of pensioner incomes and the rise in pensioner poverty.

"What does it say about our country if the elderly are used to help fund Budget reductions in alcohol duty and bank taxation?"

Interactive investor head of pensions and savings, Becky O’Connor, suggested that the news will offer a "faint glimmer of hope" to the millions of people who are dependent on the state pension.

“But the result of the vote will depend on whether it is backed by the House of Commons and if the government can agree on a fair level for next year’s rise, given that the inflation and earnings data that usually form part of the triple lock have been so distorted by the pandemic," she clarified.

Indeed, LCP partner, Steve Webb, suggested that the government is “certain” to overturn this defeat when the issue returns to the House of Commons for further debate.

Webb continued: “Even though no government likes being defeated in the House of Lords, sometimes they will consider a concession in order to get their legislation through.

“But on an issue like this, there seems no prospect of a government concession when MPs are asked to consider the issue again.

“An alternative measure of earnings growth could lead to a multi-billion pound bill which could cause the Chancellor to re-write his Budget.

“By convention, the House of Commons has supremacy when it comes to financial matters and the Lords will come under great pressure to back down if the Commons simply vote down today’s amendment.

“The government seems certain to use its comfortable majority in the Commons to overturn this defeat in the House of Lords. But it is a sign that any attempt to drop the triple lock for more than one year could meet some stiff resistance”.

Industry experts have previously raised concerns that the suspension of the earnings element could place a strain on pensioner finances, particularly amid rising pensioner poverty rates and elevated inflation forecasts.

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