Labour’s Stance on the State Pension: No Means-Testing, No Triple-Lock Changes
The Pensions Minister, Torsten Bell, has made a definitive statement regarding the future of the state pension under a Labour government, confirming that it will not be means-tested. In an exclusive interview with The i Paper during the Pensions and Lifetime Savings Association (PLSA) conference in Edinburgh, Bell dismissed the notion of introducing means-testing, stating, “No, only Kemi Badenoch thinks that’s a good idea.”
Furthermore, Bell reassured the public that there are no plans to amend or abolish the state pension triple-lock. This system guarantees that pensions increase annually by the highest of inflation, average earnings, or 2.5 percent. As it stands, the full new state pension is valued at £221.20 per week (£11,502 annually), and under the triple-lock, this amount will rise by 4.1 percent in April, bringing it to £230.30 per week (£11,975 per year).
When pressed about potential reforms to the triple-lock or considerations for its abandonment, especially in light of discussions on the Isle of Man, Bell firmly replied, “no.” His comments come amid an ongoing debate about the sustainability of the triple-lock system, which was instituted by the coalition government in 2010, and whether means-testing could allocate resources more efficiently.
Means-testing involves evaluating pension payments based on an individual’s income or savings, which can result in reduced payments for wealthier retirees. Countries such as Australia and Canada have implemented means-tested pension models, directing state support toward those in greater need.
Conservative MP Kemi Badenoch previously suggested that means-testing the state pension could be a viable method to control government expenditure, a proposition that has faced significant backlash. Critics argue that such a move would undermine the fundamental principle of universal support for retirees.
According to the Office for Budget Responsibility (OBR), the state pension system costs UK taxpayers approximately £125 billion annually, a figure projected to rise dramatically in the coming decades. Experts at RTS Financial Planning have indicated that this trend “may force the Government into making tough decisions.” In a recent blog post, RTS highlighted the urgency of the situation, stating, “The rising costs are unsustainable. By 2045, the number of pensioners is expected to surge, potentially consuming an even larger portion of national spending.”
Concerns About the Triple-Lock and Future of Pension Spending
While the triple-lock has undeniably improved the financial outcomes for pensioners, it is also costly and less targeted compared to some alternative systems. The Institute for Fiscal Studies (IFS) has noted that the pledge costs an additional £11 billion each year. Recent analysis from the IFS cautioned that the triple-lock could lead to unpredictable pension spending and urged policymakers to consider linking pension increases solely to earnings growth.
The Organisation for Economic Co-operation and Development (OECD) has similarly called for reforms to ensure the long-term financial sustainability of the UK’s pension system.
On the broader pensions landscape, Bell addressed ongoing responses to the inheritance tax (IHT) consultation regarding pensions. When asked if there would be any changes to the government’s approach following feedback, he stated, “We are not going to be changing the approach to the consultation on the detail. We’re moving forward with ensuring that pensions serve their intended purpose—the clue is in the title.”
Since his appointment in January, Bell has reflected on the challenges of the 2000s, where the focus was on ensuring continued pension savings growth. He remarked, “Policy provided the answer in the form of automatic enrolment. Solutions were discovered, and that should inspire confidence for our current challenges. However, we took too long to innovate in response to a chronic issue rather than a crisis.”
Turning to the present landscape, Bell identified the primary challenge as ensuring that pension savers receive better returns on their investments. “While I agree that contribution levels are an issue, today’s challenge is how to deliver improved returns to savers, allowing them to enjoy a decent standard of living in retirement without imposing additional burdens on their current standard of living,” he explained.
He emphasized that securing strong returns is critical before any discussions about raising contribution levels, adding, “That’s why phase one of the pension review, along with the pension bill, will focus on reducing costs in the system and laying a solid foundation for accumulation. This must precede phase two, which will address adequacy.”
Bell warned that the repercussions of poor investment returns should not be underestimated, describing it as “just as destructive” as failures within pension schemes. He concluded, “The damage from poor returns, particularly during the accumulation phase, may not seem as binary and catastrophic as the risk of Maxwell-style vanished promises, yet it is a mistake to underestimate its impact on savers. This, for me, is the exam question of today. We’re making good progress, and I look forward to tackling it with all of you in the months and years ahead.”
