Pension pot
Former Labour minister Frank Field has raised concerns about the 'triple-lock' Reuters

A Labour government would keep the so called "triple-lock" guarantee on state pensions, John McDonnell announced on Tuesday night (13 December).

The shadow chancellor made the commitment alongside Labour's Shadow Work and Pensions Secretary Debbie Abrahams as the front-benchers visited a south London pensioners centre.

"After six wasted years of Tory economic failure that has seen some have to wait longer to receive their pension, and those in work approaching retirement having to work longer with earnings stagnating, Labour won't let them face further uncertainty or reductions income," McDonnell said.

The "triple-lock" means that government backed retirement pots rise at the same rate as Consumer Price Index (CPI) inflate, earnings growth or 2.5%, whichever is greater.

But the policy, first introduced in 2010 by the Coalition Government, is controversial. A November report from the Work and Pensions Committee urged Theresa May to scrap the "unsustainable" system.

Labour MP Frank Field, who chairs the cross-party group of MPs, also warned that the "triple-lock" helps promote inter-generational unfairness.

"Accelerated increases in the state pension age, an alternative means of making the state pension more fiscally sustainable, would disproportionately affect the young and those socio-economic groups with lower life expectancies in retirement," he said.

"Allied to the introduction of the new state pension, which in future will see the vast majority of pensioners on a flat rate, the triple lock will by 2020 have achieved the government's objective of securing a decent minimum income for people in retirement to underpin private saving. The retention of the triple lock would not be inter-generationally fair. We urge political consensus before the next general election on a new earnings link for the state pension."

Review 'beyond 2020 makes sense'

The Work and Pensions Committee recommended that the government benchmark the system should be replaced a by a "smoothed earnings link".

"In periods when earnings lag behind price inflation, an above-earnings increase should be applied to protect pensioners against a reduction in the purchasing power of their state pension," Field explained. "Price indexation should continue when real earnings growth resumes until the state pension reverts to its benchmark proportion of average earnings."

The government has said it is committed to the "triple-lock system". The Department for Work and Pensions confirmed in November that the state pension will rise by 2.5% in 2017.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: "Pensioners can't continue to enjoy indefinitely a 'heads I win, tails you lose' guarantee at the expense of taxpayers.

"A review now looking beyond 2020 makes sense. The point of caution in favour of those approaching retirement is that final salary pay outs are about to start diminishing and some are arguing that existing private pension inflation proofing should be cut.

"Politicians have to strike a delicate balance but if they take too much away from pensioners they could end up sowing the seeds of the next pensioner income crisis."