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Triple-lock pension guarantee stands, says Downing Street

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Media captionBaroness Altmann: "A lot of pensioners are confused"

There are no plans to end the current pensions guarantee, the government says, after a call to abolish it.

Since 2010, the "triple-lock" policy has meant state pensions rise by the inflation rate, average earnings or 2.5% - whichever is highest.

The former pensions minister, Baroness Altmann, earlier said its costs would become "enormous" - and proposed a "double lock" instead.

A Downing Street spokesperson said it was still committed to the policy.

"The manifesto contains a commitment to protect the triple lock. That commitment still stands," the spokesperson said.

In their 2015 election manifesto, the Conservatives promised to extend the triple lock until 2020.

'Totemic policy'

Lady Altmann, who lost her post in Theresa May's reshuffle, argued instead for a system whereby the state pension increased in line with either prices or earnings, but with no commitment to increase it by 2.5%.

She told the Observer newspaper that she had tried to persuade the former Prime Minister David Cameron last year to alter the policy, but he had blocked the change for political reasons.

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Image caption The state pension is still the largest single source of income for most older people, says Age UK

Last month, in the run-up to the EU referendum, Mr Cameron said that pensioner benefits, which cost £90bn every year, were a "policy priority" but might have to be re-examined in a post-Brexit climate.

"The triple lock is a political construct, a totemic policy that is easy for politicians to trumpet, but from a pure policy perspective keeping it forever doesn't make sense," Baroness Altmann said.

"Absolutely we must protect pensioner incomes, but the 2.5% bit doesn't make sense.

"If, for example, we went into a period of deflation where everything - both earnings and prices - was falling, then putting up pensions by 2.5% is a bit out of all proportion.

"Politically, nobody had the courage to stand up and say we have done what we needed to do.

"The cost of the triple lock on the public finances from 2020 onwards is enormous.

"And if you reduce it to a double lock you save billions of pounds."

The triple lock had "fulfilled its purpose" and pensioner households were now "no more likely to be poor than other age groups", she said.


Analysis: Simon Gompertz, personal finance correspondent

It doesn't take a genius to predict that the days of the triple lock may be numbered.

The Tories fought the last election on a commitment to keep it going, but that commitment only stands until 2020.

And of course David Cameron famously warned before the referendum that a victory for Leave would put the whole thing in question.

The reason is that in a low-inflation environment, promising to raise the state pension by at least 2.5% a year adds many billions to the cost of the system over decades.

A double lock isn't the only alternative.

The lock could be scrapped completely. Or the government could consider a triple lock "lite" under which the guarantee of a minimum increase was drastically reduced.

Plus, there is another scenario, in which inflation - and perhaps wages — start to rise rapidly as a result of the drop in sterling and never look back.

In that scenario, a double lock would be just as generous as a triple lock.


Tom McPhail, head of retirement policy at Hargreaves Lansdown, agreed with Lady Altmann, saying that it could become "socially divisive" to ringfence the standard of living of one part of society.

But Age UK responded by saying that that triple lock was important because it provided older people with financial security.

"Research shows that the state pension is still the largest single source of income for most older people in the UK, with the vast majority having contributed to it throughout their long working lives," said charity director Caroline Abrahams.

"1.6 million older people still live in poverty in the UK; and our state pension is worth appreciably less than its equivalent in many other developed countries," she added.

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