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April 27, 2017



"If the triple lock remains place" is the operative phrase in this post, this is unlikely.


Can you explain what you mean by "its a transfer not a cost". Surely all spending is the transfer of money or resources so I don't see the difference.


I'm sorry, this is wrong. For starters, all costs are transfers as Nathan noted above.

Triple lock pensions are a transfer from "ourselves" to "our future selves" only if we have zero net migration, a strict average of one child per pensioner surviving into pensionable age themselves, a constant tax rate, a constant pension age, unchanging life expectancy, and retain the triple lock in perpetuity. None of which are met. Immigration at the moment is positive, meaning part of the pension is a transfer from migrants to pensioners. Not wholly unreasonable. The fertility rate is 1.83 children per woman - and allowing for a certain number of deaths in childhood means that for the forseeable future the burden of paying into the system is being born by relatively less people than the burden of paying out. Tax rates have shifted in various ways over people's lifetimes and aren't a hugely material factor, but in general tax + NI burden has dropped slightly for average earners in a typical pensioners life time. Life expectancy has increased for the current cohort of pensioers, but has slowed down and the current millenials cannot expect the same rate of growth in their life expectancy - although this is a prediction for the future - not a fact. Finally, if, as is likely, the triple lock will be abandoned, then a small cohort of pensioners will have been transferred wealth from workers which the workers themselves never benefitted from.

Overall the current pension scheme is a classic Ponzi scheme - those who withdraw from the system early make a lot of money - there is nothing left for those who join late.


"You might object that the transfer is a cost to the young. No. Most young people will become old and thus will get a state pension."

No, Chris. Judging by form, baby boomers will do away with the state pension. Long before we reach retirement. We can't count on there being a state pension. They're thieves.


We are squabbling over the crumbs as the rich make off with the cake.

Only today's cake can be shared to day, claims on the future cake are just that and will be honored or not by the people at the time.

The elite have much too much of the cake. Now and in the future.


Following up 1st and 4th comments, I'm 33 and no-one my age is expecting or planning for there being a state pension when we retire. We're all either making our own private arrangements or expecting to work until we die. Although I agree that there is the *theoretical potential* for things to work as you describe, it's not working out that way because my generation works on the assumption that somewhere along the line we're going to get screwed. Again.

Go Access Ltd

I feel that the only people that ever benefit are indeed the rich. They always get the cake and those who work hard all their lives always end up losing out. I work with disabled and elderly people fitting disabled steps and ramps and it is shocking to see the conditions some people live in after having worked 50 plus years of hard graft.

Stewart S

Others have pointed out the obvious flaws in the assumption of future provision.

For me, the problem is the misallocation of resources. There is a desperate need for more provision in social care, nhs and pensioner housing. Yet the emphasis is always in bribing those who vote in large numbers. It is not just the triple lock. What about the big tax cuts under Blair when income tax was transferred to NI? What about massive increase ISA allowances and reductions in Inheritance Tax. The question is do we want good social provision or more cruise liners. Pensioners as a group are well capable of providing the resources to fund today's problems.

The triple lock was a factor in the Brexit vote. Pensioners knew that they were protected from the economic implications.


Chris is in agreement with many that the triple lock is not a major cost. But our government is very hard up and will steal from anyone - except their own. The big question is why. I think the problem is the way our government is organised, it tends to flap around from pillar to post never settling on any thought out policy.

There is a reason for that, any credible thought out policy will involve higher taxes, more houses, more industry, a goodly slice out of the Green Belt and holding two fingers to the Nimbys. But such a policy setup would look a bit too European, a bit too social democratic.

As it is we look to be headed out into the Atlantic for our policies just as America is finding its free-for-all is not really working out. That is typical for British policy making.

As for the young. They need to get together in an organised way and really stick it to the politicians. "How many Council flats did you build last week" should be the scary question. The brighter political parties will be looking to social media. But sadly political parties will tend to stitch up the young just as completely as the current bunch.

As it is we are drifting way to the Right and nothing good will come of that. The drift back to the Centre has not even begun but the fuel heap is there and growing.

gastro george


"Only today's cake can be shared to day, claims on the future cake are just that and will be honored or not by the people at the time."

Best sentence I've read for a while.


The same reasoning can be applied to a figure of 10% or 25%. I can't see that working out well.
There's a nice paper in 2016 on the OECD web-site by Fournier and Johansson which finds that "Reducing the share of pension spending in primary spending yields sizeable growth gains with no significant adverse effect on disposable income inequality. This reduction could be achieved by an increase in the effective retirement age or by cutting the replacement rate" and "Increasing the share of pension spending in primary spending by one percentage point (offset by a reduction in other spending) would decrease potential GDP by about 2%."
But if that doesn't convince you the triple lock is a bad idea, consider the effect on the lefties favourite theme of inequality. The low income pensioner loses 85% of any net increase due to the taper rates of Housing Benefit and Council Tax Reduction. The highest income pensioners lose 45, 40 or 20% of the net increase.

derrida derider

You are perfectly correct to defend public pensions as being a transfer set at a level linked to community living standards, or (equivalently in the long run) the tax base available to be transferred, is quite correct. Certainly fairer, more efficient and far simpler than depending on compulsory private pensions.

But you are missing the point about the long run effect of the triple lock - that if the RPI and earnings series are both noisy then the pension level will rise FASTER than community living standards because of the "highest of the three" algorithm. If it was just BENCHMARKED to earnings (we'll index by RPI but if needed further increase it after indexation to ensure it is not below x% of average earnings) as the Australians do then it wouldn't be an issue.

This is not mainly a short term budget issue (you're right there) but a long run intergenerational equity issue - you and I are going to suppress our children's living standard in favour of own by more than our parents did to us.


""Only today's cake can be shared to day, claims on the future cake are just that and will be honored or not by the people at the time."

This is true, but also useless. Whether your claim is directly on the state budget, or on a pile of government bonds, it's still a claim on the future cake. There is no way around this.

In some sense, all pension systems are PAYG but some are in denial. Even if you have a fully-funded set-up, when it pays out it must either clip coupons - collect dividends, interest, or rent - or sell assets.


"As Albert Einstein said, “the most powerful force in the universe is compound interest.”"

Indeed. Which is why demography and (especially) fertility are such fascinating topics.

"I believe that children are our future" as George Benson rightly said.

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