The state pension and election promises

In the last general election in 2019, the biggest age groups that turned out on that cold December day to cast their vote were, unsurprisingly, those aged 65 or over.

There is no escaping that fact. The older people in the UK are those most likely to vote. And therefore, it’s no shock that so many of the headline policy announcements are aimed directly at them.

The state pension is a particular case in point. Despite being generally accepted that a triple lock guarantee is unsustainable over the long term, both major political parties have committed to continue it. Last year, the Institute of Fiscal Studies (IFS) highlighted the cost of the triple lock guarantee for future governments could be anywhere between £5 billion and £45 billion a year. Despite the eye-watering cost, this wide funnel of possible expense shows there is no certainty for future governments to plan for and accommodate the price tag. Instead, they are constantly having to juggle finances to adapt.

In recent weeks, the Conservatives have gone a step further. Due to a couple of generous increases to the state pension over the last couple of years, it is now perilously close to the frozen personal allowance, and after another few increases it will outstrip it altogether, meaning those in receipt of the full new state pension will always pay tax. Keen to avoid this, the Conservatives are suggesting a separate personal allowance just for pensioners.

This is nothing short of a naked grab for pensioner votes. It would come at the cost of adding complexity, as well as the real threat of driving a wedge between generations. No-one wants to see pensioners struggle financially to eat and heat, but at the same time a fair solution has to be found.

This feels like prime ground for an independent commission to review. At the moment, state pension is a super-charged political issue, and it feels as if it’s being bandied around to prove which party most wants the older vote.

The next government needs to take a step back from political rhetoric. There are big issues to unravel here. What level should a state pension be set at? How and when should it be increased? Answering both these questions will give some financial certainty to future governments and, ultimately, retirees.

An independent commission could even begin to grapple with the bigger question of whether it should be a universal benefit paid to all, or whether it should be means-tested to only help those who truly need it. The cultural ramifications of this approach would be extreme, however, and means-testing would add both cost and complexity to the system.

Of course, we already have an independent review of the state pension age. But this cannot be said to be an unqualified success. The last couple of times it has reported, the issue of whether to bring forward an increase to age 68 has been kicked down the road. This has left people confused. Recent AJ Bell research found 72% of UK adults expected state pension age to increase, but they need to know more to be able to plan with certainty.

Taking the politics out of the state pension debate seems the best way forward. But it will only work if future governments promise to act on the findings, and not ignore them. And that may be a political ask too far.