View from London: Why the golden era for pensioners is over in Europe

Politicians in Europe prepare to sacrifice the retiree vote to rein in costs, The Telegraph notes.

Since 2012, the state pension triple lock has protected millions of British pensioners from poverty, guaranteeing that their payments increase every year by the highest of wage growth, inflation or 2.5pc.

But its future has never looked more uncertain, after Andy Burnham announced his intent to water down the triple lock after the next election.

Under his vision, the wage growth element of the mechanism will be removed from 2030 in a move that could cost retirees £1,600 a year within two decades.

His proposal could come back to bite Labour at the polls, but targeting pensioners is a move that the Prime Minister believes is necessary to rein in spending, and one which mirrors a growing trend across the Europe.

Cash-strapped governments across the Continent are putting a target on the back of pensioners as they desperately attempt to balance the books.

Second time lucky in Paris

Across the Channel, the French government was met with fierce opposition when it tried to raise the retirement age to 64.

At just 62 and nine months, it remains one of Europe’s lowest, but more than a million protesters took to the streets and forced ministers to halt the full increase until after next year’s presidential election. However, France already spends more than 14pc of GDP on pensions, forcing ministers to act.

In its new budget, introduced earlier this month, Prime Minister Sébastien Lecornu’s government proposed reducing inflationary increases on pensions above €1,260 (£1,050) a month. The measure is still expected to be watered down under opposition scrutiny.

Gordon Clark, professor emeritus, economic geography, at Oxford University, and author of European Pensions & Global Finance, said it was a familiar problem across Europe.

“French workplace pensions are very modest, so retirees rely almost entirely on the government and there aren’t enough workers to pay for them. Young people are now rioting, but attempts at reform have come up against the realpolitik power of older generations at the ballot box.

“It’s a familiar problem across Europe, because if people think they should work until 60 or 65, but they’re living to 80 or 85, there’s a 20-year gap. If you add in early retirement, you add a further burden into an already stretched pension system.

“Very few government-sponsored social security systems were set up to cope with increased rates of early retirement and people living so long.”

Andrew Reilly, a pension analyst at the Organisation for Economic Co-operation and Development (OECD), said that the ageing population would lead to further changes across Europe and beyond.

He said: “If you look at the long term projections on spending, there will have to be further changes because there are still 20 OECD countries that haven’t legislated increases in their retirement age.

“The problem is caused by the ageing population. The average retirement age in the OECD is effectively the same as it was in the 1970s, because a lot of countries reduced them in the 1980s and 90s.

“If you adjust your pension costs by 5pc now, you’re saving 5pc a year forever. But if you’ve got the same promise of pension, you have to be able to finance that and many countries simply won’t be able to.”

Britain finally slaughters the sacred cow

Since 2011, the triple lock has guaranteed that state pensions rise by the highest of wage growth, inflation or 2.5pc. The basic state pension has subsequently risen by 81pc and the new state pension – introduced in 2016 – has jumped 55pc.

According to the Office for Budget Responsibility, however, the policy costs £12.6bn a year and will hit £15.5bn by the end of the decade. With payouts already expected to exceed £180bn by then, Mr Burnham wielded his axe.

From 2030, the wage growth element will be removed. Instead, the state pension will rise by 2.5pc, inflation or the amount required to maintain its proportionate level to the average wage, which will be “at least 30pc”.

According to government figures, it will also save £50bn a year by 2050, by which time a quarter of the population will be aged over 65.

By announcing changes from 2030, the Prime Minister has undoubtedly taken bold action aimed at securing Britain’s future.

It remains to be seen, however, what effect they will have on his own.

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