Retaining the state pension triple-lock will damage the UK economy, which is “already heavily skewed toward baby boomers” at the expense of younger people who have borne the brunt of public spending cuts.
That’s according to an influential group of MPs, who say the triple-lock should be scrapped and replaced with a new, “fiscally sustainable” state pension that is more closely linked with average earnings.
“The Committee proposes a smoothed earnings link for the state pension”, say MPs in a news update published on the Committee’s website.
“The new state pension would have a benchmark proportion of average earnings below which it could not fall. By 2020, the level of the NSP will be close to historic highs for the headline rate and above the means-tested minimum. It is a solid foundation for personal saving.
“If inflation exceeded earnings growth, the purchasing power of the state pension would be protected by price indexation. This price indexation would continue once earnings growth again exceeds inflation until the state pension is again at the benchmark level”.
It continues: “This is fiscally sustainable (unlike a simple double lock, which would mean the value of the state pension continuing to grow relative to the rewards of work, especially during times of economic difficulty) but fulfils the objectives of supporting pensioners who would share in the proceeds of growth and get protection against high inflation”.
MPs also expressed concerns that accelerating increases in the state pension age would disproportionately affect millennials and disadvantaged groups, who the Committee says are already worse off and tend to have a shorter life expectancy than more affluent groups.
The Committee also argues that universal benefits like Winter Fuel Payment should not be “off limits” when looking for savings, considering how “pensioners have been protected from the public spending cuts that have largely been felt by younger groups”.
Frank Field MP, Chair of the Committee said: “The welfare state is underpinned by an implicit intergenerational contract. Each generation is supported in retirement by their in-work successors.
“This is supported by all age groups, but a combination of factors has sent the balance out of kilter. It is now the working young and their children who face the daunting challenge of getting on in an economy skewed against them.
“Homeownership, taken as a given by many in my generation, is out of reach for too many aspiring young people today. At the same time as tightening their belts, they are being asked to support a group that has fared relatively well in recent years. Millennials face being the first generation to be poorer than their forebears.
“No party has been immune from chasing the pensioner vote –but at what cost to future generations? Politicians of all stripes must accept some responsibility for these trends, and we must act together now to address them.
“Great strides have been made against the scourge of pensioner poverty and the new state pension is at a level to provide an effective minimum income and encourage personal saving.
“It is time for the triple lock to be shelved. The system we propose protects pensioners and allows them to share the proceeds of future good times, but at the same time is inter-generationally fair.
“We call on all parties to get behind it.”
David Sinclair, Director of the International Longevity Centre – UK, urged caution against cuts to pensioner benefits, warning average pensioner income is likely to fall in the next decade.
Mr Sinclair said: “As our society ages we need to adapt our welfare state to ensure its sustainability and long term survival. But whilst it is right to debate cuts to pensioner benefits, we must take care not to throw the baby out with the bathwater.
“Within the next decade we are likely to see average pensioner income start to fall. We must ensure that public policy protects the income of tomorrows poorest pensioners, particularly those who won’t have any private savings at all.
“This debate cannot be about young versus old. Younger people are tomorrows pensioners. They can look forward to a long and increasingly healthy old age. Younger people will need the support of a welfare state and many will rely on it. Younger people need decent, well paid jobs which help them save for old age.
“Government and businesses must focus on ensuring our economy can better support an increasingly older consumer and worker. We must improve workforce productivity and create meaningful employment for all ages. There is a very strong case to invest in education for young and old alike.
“Increasing the number of new homes being built will benefit young and old. Government must prioritise housing investment to ensure that older people have places to move to and younger people can get onto the housing ladder”.
Last week, a right-wing thinktank, with close ties to the Conservative Party, called for the state pension to be scrapped and replaced with a “Workplace ISA”.
This article was last updated at 15:55 on 06 November 2016 to add a comment from the International Longevity Centre – UK.