Gaby Hinsliff (Britain needs cash and everyone knows we should break the pensions triple lock. Where is the courage?, 22 September) is right that public policy should not subsidise wealth without limit, but breaking the triple lock is a poor way to target affluent pensioners. Most pensioners are not affluent.
Indeed, a quarter of pensioners require benefits in addition to the state pension just to survive and keep a roof over their heads. If the aim is to stop subsidising wealth, a more direct target is the generous tax treatment of private pension savings. A taxpayer contributing £100 to a pension can receive £40 or £45 in tax relief if they pay higher- or additional-rate tax, compared with £20 for the basic rate.
Tax and national insurance contributions relief on private pensions costs the government a staggering £84bn a year. Most of this money (almost three-quarters) goes to the wealthiest 20% taxpayers because they can afford to save the most and receive the highest rate of relief. Instead, a flat 20% rate of tax relief on private pensions would preserve the incentive for basic-rate taxpayers while reducing the additional subsidy concentrated among higher earners.
It’s also fair because when pensions are drawn down, much less tax is recovered by the Treasury, making the net cost of this relief over £50bn a year. This could raise billions more than breaking the triple lock. The triple lock’s 2.5% floor was only significant during the period when both earnings growth and inflation were close to zero.
When inflation and earnings growth are above 2%, as they are now and are expected to be over the coming years, the difference between the triple lock and a conventional uprating mechanism becomes irrelevant. The policy challenge therefore is to avoid the economically irrelevant, politically damaging and socially divisive red herring that is breaking the triple lock and instead reform the far more regressive support given to large private pension pots.Stephen RichardsonGrange-over-Sands, Cumbria Gaby Hinsliff makes the point that retirees of the future are likely to have smaller cushions to fall back on than baby boomers. But it is precisely this that justifies maintaining the triple lock as a bulwark against poverty.
Young and middle‑aged workers do indeed face the prospect of an impoverished old age. As highlighted in the Pensions Commission interim report, according to 2025 figures, 43% of working-age people are undersaving for retirement, with just 25% of Bangladeshis and Pakistanis of working age participating in a pension scheme. The pensions crisis is likely to grow, given the rise in the numbers of self-employed people – the group least likely to be saving for a pension.
Extract — continue reading at the source.
