Pensions, the triple lock and Scottish independence

Steve Webb has come under a bit of fire for comments that his triple lock, which guarantees a state pension rise by the higher of earnings, inflation or 2.5% can’t be guaranteed after the election. Let’s look at what he actually said to the Financial Times.

My view is it should be triple lock; to be absolutely clear, I would want to see that continue. But we, as a party, will have to thrash that one out.

He made clear that this would be something that all parties would have go deal with.

This is pretty much a statement of the obvious. Every policy of a previous government is up for grabs once the next lot come in.

The triple lock, of course, was brought in when the pension was much lower. It was £97.65 per week  in 2010-11. Sustaining it over the longer term with a pension rate of £142 per week which will be brought in by the Pensions Bill currently going through Parliament  is bound to present challenges. We will need to be quite clear about how we would pay for it. Steve clearly thinks that we should and will no doubt argue his case with the Manifesto Working Group which is currently developing the platform for 2015.

I have long said that it is ridiculous that a family with a disabled child get no help with heating costs while my husband, who is still earning a reasonable amount, qualifies for Winter Fuel Allowance that we don’t need because he’s over 60. I’m very encouraged that Nick Clegg has signalled that any further cuts to welfare must come from those who can most afford it. The money that will save is not sufficient, however.

Our record on improving and widening access to a decent state pension as well as ensuring fair annual increases, is undoubtably one of the best things we’ve done in Government. It’s the sort of reform we have been talking about for as long as I’ve been in the party. Steve Webb wrote about the new Bill for LDV in January:

 It will treat men and women equally for the first time and will value unpaid caring work just as much as a high-flying city job. That is why the big winners from Single Tier will be women, carers and some low earners who haven’t previously received much in the way of earnings-related state pension. And for the first time ever, we will be bringing the self-employed fully into the state pension system.

You know your polices must be good when they’re nicked by your opponents. Scottish Finance Minister John Swinney told the Institute of Chartered Accountants in Scotland that an independent Scotland would, from 2016 provide a single rate pension with a triple lock. Willie Rennie took him to task for promising a Liberal Democrat pensions policy without saying how he would pay for it:

The triple lock is a great policy for pensioners which is why we are delivering it in Government.  It’s been possible with the economic base of the United Kingdom.  The SNP promise our policy but have failed to show how they will pay for it. Instead of promising everything and costing nothing they should answer the serious questions posed by ICAS about the security of pensions after independence.

Swinney spoke of a “seamless transition” of pensions after independence. This flies in the face of what ICAS said in a report questioning how the pensions system could operate post independence given that many schemes currently operate across the whole of the UK. The effect of EU rules requiring schemes to be fully funded if they operate over more than one country could cause significant problems, they said:

If Scotland became an independent country there would be significant cross-border issues for schemes which currently operate UK-wide. Under EU law (as interpreted by UK legislation), schemes which operate in more than one country must fund their liabilities in full and any underfunding must be rectified immediately rather than through a staged recovery plan. Dealing with underfunding would have major cost and cash flow implications for employers with underfunded cross-border schemes.

That doesn’t sound seamless to me.

Swinney’s assertions are consistent with the SNP’s “it’ll be fine” attitude to everything. If you question them, you are accused of scaremongering. Scottish voters are too canny to just cross their fingers and hope for the best. They will need much more credible details if they are to be persuaded to vote for independence than the SNP has yet been able to provide.

Why, though, should voters choose some sort of  imitation of Steve Webb’s scheme when they can have the real thing by staying in the UK?

* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings

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  • I think there may be a word or two missing from your first sentence … his triple lock what?

  • Eddie Sammon 19th Jun '13 - 12:25pm

    The triple lock is irrational and I don’t know how it ever came into existence besides on the basis of being scared of awarding pensioners 70p rises in the state pension.

    It’s such a shame how politics seems to be a bit game rather than being economically competent.

  • Geoffrey Payne 19th Jun '13 - 12:30pm

    The advantage of universal benefits is that they are cheap to run. If you want to tax the rich more to cancel out their benefit entitlements, then why not do that? Equalise capital gains tax with the upper rate of income tax would be one way of doing it.
    I am not in the least reassured that Nick is saying that there will be no benefits cuts for the poor unless there are benefit cuts for the rich. That implies that benefit cuts for the poor are on the table. It is what he said last time and benefit cuts for the poor duly arrived. People living on or below subsistence levels should not get benefit cuts.

  • Eddie Sammon 19th Jun '13 - 12:42pm

    No No Geoffrey – as I mentioned the other day: capital gains are subject to corporation tax within the company at 20% before they are taxed at 28% on the way out – this is a total tax of 42.4%.

    If you equalised capital gains tax with income tax then the total combined tax rate would be 56% for additional ratepayers. Even higher if you also want to increase the corporate tax rate for large businesses.

    This is the reason why capital gains and dividends are taxed less than income – because they have already been subject to tax.

  • “while my husband, who is still earning a reasonable amount, qualifies for Winter Fuel Allowance that we don’t need because he’s over 60.”

    Interesting statement, as the only reason he will be receiving winter fuel payments will be because either he has explicitly applied for them or he is also drawing down his state pension rather than deferring it.

    Me thinks the husband is either not quite as well off as implied or he is just being financially astute…

  • @Roland – you only have to claim the benefit if you don’t already get paid the State Pension. So since everybody has to claim the state pension, you can’t automatically refuse the Winter Fuel Allowance.

  • @Keith – Actually, I overlooked a couple of important points:
    Firstly Caron did say ‘qualifies’ rather than ‘receives’ – so apologies to Caron if I jumped to the wrong conclusion.
    Secondly, men don’t get state pension until they are at least 65. So they would need to make an explicit claim – unless they are in receipt of another social security benefit (not Housing Benefit, Council Tax Reduction or Child Benefit), hence I would regard this as being financially astute ie. claiming all that you are entitled to.

  • David Wilkinson 20th Jun '13 - 8:46am

    Clegg’s new policies
    Get rid of the triple lock
    Squeeze richer pensioners
    Then he can really do over everone else on benefits

  • Caron,

    I would regard what you intended doing as morally right and is something I’ve have recommended many people to do. You’ll get a little satisfaction from claiming the ‘windfall’ monies and a lot of satisfaction in donating it to a charity that you have more than a passing interest in.

    Being financially astute, I would recommend Gift Aiding your donation and declaring it on your tax return. For the action to be neutral to yourselves, I would recommend using one of the following multiples:

    Basic Rate: WFA * 1
    Higher Rate (40%): WFA * 1.33
    Upper Rate (45%): WFA * 1.45

    Basically, these will enable you effectively to Gift Aid both the WFA and the rebate you’ll receive from HMRC. Given that the charity will receive whatever you donate plus 25%, some astute financial actions can significantly increase the value of your donation to the charity, whilst costing you very little.

    Apologies, been involved/responsible for Gift Aid etc. for several decades, so couldn’t let the sales opportunity pass! 🙂

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