With the news dominated by the political parties’ respective manifestos, there’s a lot of information to digest. At the time of writing, the Conservatives are attempting to demolish Labour’s economic pledges, the Lib Dems have pledged a second EU referendum, and the UK Independence Party is, well, who cares what UKIP is doing.
At the heart of party policies for pensioners is the triple lock. This pension guarantee stipulates that the state pension will increase every year by the higher of inflation, average earnings or a minimum of 2.5 per cent. It’s an important element of pensions, and effectively protects pensioners from meaningless increases, such as the much-derided 75p a week rise in 2000, and makes sure their income is not eroded by the gradual increase in the cost of living.
While both Labour and the Lib Dems have promised to protect the triple lock, it is thought that the Prime Minister is keen to scrap the system in favour of a new double lock, with the money saved put towards social care instead.
Needless to say, this has not gone down well with the public. And now new research by financial planner Tilney has found that a third of over-45s fear their quality of life in retirement will deteriorate if Theresa May decides to reduce state pension benefits.
In addition, according to Tilney’s Cost of Tomorrow report, two in five people are concerned that the rising cost of living will erode their wealth in later years, while 37 per cent are worried about the effect of sustained low interest rates on their savings.
One in five also worry about the impact that Brexit will have on their wealth in retirement, while a quarter said they believed another global recession would reduce the quality of their retirement years.
Andy Cowan, head of financial planning at Tilney, said: ‘There’s no question that we’re living through a fairly turbulent time, both politically and economically, and this is stoking up a fair bit of uncertainty among people nearing retirement age. Uncertainty can be a thorn in the side when planning long term financial security, so it’s far from ideal that the future of the state pension could hang on the outcome of the general election.
‘Whatever the outcome there’s plenty that pre-retirees can be doing to insulate themselves against any future changes to policy. Building up a nest egg early, making the most of tax-favourable savings vehicles, and preparing for a longer retirement as life expectancy extends, are all sensible steps people can take. But most important of all, don’t expect the state pension to cover all your living costs. A typical household spends £26,500 every year until 75, so a couple will still need to find £14,100 per year on top of their state pension to meet the average spending level and sustain their standard of living.’
Helen Nugent is Online Money Editor of The Spectator