The Cost of the Treble Lock is Becoming Unsustainable!

Rethinking Britain’s Pension Promise: Time for a National Investment Superfund?

Every party except Reform UK is currently committed to the triple-lock on pensions - the guarantee that the state pension rises each year by whichever is highest: inflation, average earnings, or 2.5%. It's an iron rule designed to stop pensioners sliding into poverty.

The problem with this is that it's becoming unsustainable!

The Cost of the Triple Lock

The cost of the UK state pension this year will be around £146 billion to the Treasury, and is forecast to double in real terms in fifty years. With an ageing population and sluggish growth, and that kind of maths simply doesn't add up!

A National Investment Superfund...

An alternative suggestion (to national pension induced economic collapse) is to set up a National Investment Superfund....

The idea is simple: if Britain could seed such a fund with £100 billion and allow it to grow through careful, long-term investment, the returns could transform public finances and retirement security alike.

Assuming a modest annual return of 7%, the fund would start to pay every British retiree their pension guaranteed in real terms in two generations. The benefits wouldn’t just be financial: taking pension funding away from the public finances, which would free up public funds for investment into social services.

Keynesian Rootes...

This idea seems firmly rooted in the kind of Keynesian optimism that built the NHS in the 1940s - Labour's last truly visionary act of social construction. The moral appeal is powerful: to guarantee that every child born today can expect a decent pension as a right while simultaneously investing in the nation's future.

This does seem to have worked in Canada, which has created an independent investment management board that now oversees hundreds of billions of dollars on behalf of its citizens.

But will it work...?

The problem we've got is that this idea may not work in the context of the fragile wider economic backdrop remains. We live in a time of extreme economic uncertainty....

Back in January, optimism ran high that the European Union might finally “come of age,” outpacing the United States. Instead, America — supposedly being “governed by a madman” — has defied the prophets of doom, while the eurozone limps along at a miserable 0.1–0.2% growth rate.

Meanwhile Germany's "ultra-tough fiscal policy" has softened, while France is mired in political instability.

Given all of this, the opportunities to make stable long-term investments seem pretty limited...?

Final Thoughts...

I dunno.... I mean the treble lock can't carry on in the context of an ageing population in the current stagnant economic conditions, may as well give this kind of fund a punt?!?