Should the pensions triple lock be scrapped to pay for Covid-19 recovery?

The Social Market Foundation said that the huge economic cost of the emergency measures deployed to manage the epidemic "must be shared fairly between old and young in the years ahead".

In a new briefing paper, the SMF said that any future austerity programme "must not favour pension spending over working-age welfare, as happened after the financial crisis".

The triple lock ensures that the basic state pension will rise in line with the highest of earnings, inflation or 2.5%.

Replacing the triple lock with a 'double lock' that removed the 2.5% promise would save £20 billion over five years, the SMF estimated, since pensions would rise in line with what are expected to be lower rates of growth in wages and prices.

The report said: “In the post-crisis world of slow, painful recovery, a triple lock ensuring a 2.5% minimum rise in pensions would constitute enormous generosity to pensioners, at a time when working-age adults face low or no wage growth and significant unemployment.

“In the context of an annual deficit that could reach £200 billion as we emerge from the crisis, shaving £4 billion a year from the growth of the £100 pension bill is not too much to ask. It would also demonstrate reciprocity from a group whose wellbeing was, rightly, prioritised during the lockdown phase of the crisis.”

Scott Corfe, the SMF’s research director, commented: “Quite rightly, society is making sacrifices to protect its elderly right now. There is a clear case for intergenerational reciprocation when it comes to meeting the fiscal costs of the crisis in the years ahead.

“The crisis has emphasised our obligations to other generations, even in the face of personal sacrifice. This spirit must be maintained when the dust settles – with the economic costs of responding to the crisis shared fairly across the generations.”

Ian Browne, pensions expert at Quilter, added: “Reforms to the state pension triple lock have long been mooted around times of budgets and general elections, but with the unprecedented times we find ourselves in it is rightly being brought up again as something that needs to be changed to ensure intergenerational fairness. With the increased borrowing from the government to help pay for the coronavirus lockdown, there has arguably never been a better time politically to replace the triple lock as government finances come under increasing pressure.

“The Conservative government has somewhat hamstrung themselves given their election manifesto promise to keep the triple lock in place. With increased spending already on the table before coronavirus hit, the government could find themselves caught between a rock and a hard place as they struggle to manoeuvre the economy out of this stagnating phase.

“Whether a ‘double lock’ is the best system to introduce remains to be seen, as the outlook for inflation is uncertain just now and in the long run could just cost exactly the same as the triple lock.

“Arguably the triple lock has worked well in reversing the relative decline in the state pension so that it has made up much of the ground it had lost relative to earnings during the 80s and 90s. Going forward it should be linked with long terms earnings growth, otherwise there is a risk that the unusually swift ratcheting effect it had on the state pension from 2008 onwards could happen again in the exceptional economic times ahead.

“However, if there is no departure from the triple lock it will only place increasing pressure on this government to address the state pension age. Increasing the state pension age to much later in life is the alternative means of reducing the future cost of retirement benefits, but would have greater harm on future generations.”