Conservatives concede triple lock for DUP support

The state pension triple lock and winter fuel payment will remain in place for the rest of the current Parliament as a concession to Democratic Unionist Party in response for its support of the Conservative Party.

A deal between the Conservatives and the DUP struck today also includes an extra £1bn in funding for Northern Ireland.

State pension guarantees were the first item on a list of demands from the DUP, which also included meeting Nato’s 2 per cent arms spending commitment and a pledge to maintain cash support for farms until the end of this Parliament, regardless of how EU exit negotiations develop.

The agreement says: ‘Both parties have agreed that there will be no change to the Pension Triple Lock and the universal nature of the Winter Fuel Payment’.

The maintaining of the triple lock reverses a pledge made to abolish it in the Conservative manifesto. But Royal London director of policy Steve Webb says the deal also increases the likelihood of a cut in tax relief.

Former UKIP leader Nigel Farage says the Prime Minister’s mistakes during the General Election campaign ‘have cost the UK taxpayer £1bn’.

Webb says: “Retaining the triple lock is likely to be relatively cheap, now that inflation has risen above the 2.5 per cent floor. Means-testing winter fuel payments was always going to be complex and controversial, so many Conservative MPs will be pleased to see this policy ditched. However, the DUP decision to back Conservative Finance Bills probably means a greater likelihood of getting cuts to pension tax relief through Parliament.”

AJ Bell senior analyst Tom Selby says: “Political necessity has once again trumped long-term thinking when it comes to the state pension triple-lock. The policy has simply become a symbol for doing right by older people, and as a result there has been little serious debate over its purpose or sustainability.

“The reality is the triple-lock is a random mechanism for ratcheting up the value of the state pension during periods of low inflation and average wages, without any clear destination or justification. Indeed, moving to a double-lock of earnings or inflation is unlikely to cost a lot less in the short-term – and could cost nothing at all if either remains above 2.5 per cent between now and 2022.

“The state pension system will come crashing down unless spending is reigned in, with estimates suggesting it will cost £30bn more in today’s terms in 50 years’ time unless reforms are introduced. This will involve either reducing the amount people receive, or increasing the state pension age. Neither of these reforms will be popular but if politicians refuse to address this reality they will risk further piling the burden on future generations.”

Hymans Robertson partner Chris Noon says: “Moving to a “double lock” would have been the equivalent of a £250 a year reduction in state pension, impacting those on low and middle incomes the hardest. In fact the Government’s own figures show that the state pension changes introduced in April 2016 actually reduced the long-term costs of the state pension by £8bn a year, a figure which already includes the cost of the triple lock.”

Old Mutual Wealth tax and financial planning expert Rachael Griffin says: “While it’s discouraging the Conservatives have pushed aside this expensive issue, it now gives them the opportunity to carefully consider their approach.  One option that should be on the table is a ‘smoothed earnings link’ from the Work and Pensions Select Committee. This means growth in pensions continues, but when earnings fall behind price inflation, an above earnings increase could kick in until either earnings growth resumes or for as long as the pension remains above a previously established limit compared to average earnings. When this happens it would revert to earnings.

“This would ensure that the state pension rises in line with earnings rather than faster than earnings, but also protects pensioners when earnings fall.”