Triple Lock Under Attack Again

July 7 2021

Once again there has been a flurry of media attacks on the pensions protection mechanism, the Triple Lock. No sooner had the government hinted that it was about to relax the Coronavirus lockdown measures than the usual subjects went on the attack and you can expect more of this in the coming weeks. Make no mistake about it this is a well funded, organised campaign to undermine the very principle of a decent State Pension by the extreme Thatcherite think tanks, institutions and big business funded organisations who have successfully held back the development of a decent State Pension in the UK since it was first established in 1909. These organisations are not just against any improvement in the State Pension but are opposed to the very idea of a State Pension in principle. They believe that the private sector should be the only provider of pensions and are even against decent occupational pensions. Before the 1986 Financial Services Act, introduced by the Thatcher government, employer’s could make membership of a company pension scheme a condition of employment. As a consequence workers in the UK enjoyed some of the best occupational pensions in the world. Trade unions were able to negotiate improvements and it became an important part of their negotiating portfolio. A decent occupational pension scheme was, for many people, an important consideration when joining a company or starting a career. Many retired CWU members today enjoy the benefit of working for companies that provide amongst the best occupational pensions in the country. In the 1980s, the Conservative government ran a number of adverts on the television and in the newspapers urging people to ditch their occupational pensions and ‘break the chains of compulsory scheme membership’. It was an important part of their so-called revolution in ‘individual responsibility’ and ‘market freedom’ that dominated the 1980s.  Unfortunately many workers fell for this and it led directly to the mis-selling scandal of the 1990s. Many people who took up this option lost thousands of pounds in pensions entitlements and although the scandal is estimated to have cost insurers and financial advisors at least £11.8bn in compensation, it by no means compensated all those people who lost out on their pensions income. The 1986 Act also saw the introduction of rules to reduce pensions scheme surpluses. Many schemes were accused of hiding profits in their pension schemes to avoid paying tax. This was not illegal as long as it was agreed by the Inland Revenue, Superannuation Funds Office. So the Conservative government introduced legislation that forced schemes with funding levels in excess of a certain amount to reduce surpluses by choosing one of the following options:

1. Making taxable payments back to the employer;

2.Suspending employer or employee contributions;

3.Improving benefits or providing new benefits to members.

Needless to say the majority of employers went for option 1.

In an article in Professional Pensions, independent pensions advisor Ros Altmann said.

‘The taxation of pension fund surpluses was a huge, but unrecognised, negative influence on our defined benefit pension system. The so-called surpluses were not really surpluses but funds needed for future pensions and risk buffers against unexpectedly bad markets or rising longevity. While the schemes were immature, they should have been keeping those surpluses intact but, once they became taxable, there was an instant incentive for employers to ensure they were no longer there. If only we had had better funding buffers and risk margins, our pension system would be muchstro stronger today’.

So there we have it and the tax raids on the countries occupational pensions by Gordon Brown in the 1900/2000s became the final straw that broke the back of the UKs world leading occupational pensions but that is another story. Today, for most people, decent occupational pensions have become a thing of the past for many UK workers and that is why the State Pension and its continued improvement is so important for the future well being of working people in the UK. Once again the State Pension is under attack. We have an important spokesperson for pensioners in Jack Jones, the TUCs Pensions Policy Officer. Last week we posted an article by Jack on why it was important to defend the Triple Lock. It’s well worth a read and thanks Jack for keeping the flag flying for future pensioners and thos