The Podcast of the Lotus Eaters - PREVIEW： Brokenomics ｜ Triple-lock pensions

00:00:00.000 Hello and welcome to Brokonomics. Now, in this episode I thought I'd talk about the

00:00:26.520 triple lock pensions, because that seems to be a bit of an issue at the moment. Well, it was really

00:00:32.500 a bit of an issue a week ago when reform came out and announced that they were going to safeguard

00:00:38.060 the triple lock, which was always meant to be a very temporary measure. It was supposed to be a

00:00:43.240 short run measure that lasted for a couple of years in order to adjust a perceived deficit in

00:00:48.960 pensions. But the problem is, is once you introduce something, it becomes nigh on politically

00:00:54.400 impossible to ever get rid of it and thus you go up the ratchet which is a little bit unfortunate

00:00:59.320 so we've been talking about triple lock pension uh why it is quite mental and it it's it's kind

00:01:06.260 of incontrovertible when you get into it because uh basically it will it it will end up swallowing

00:01:12.640 everything if the nhs doesn't get there first the nhs and the triple lock pensions will basically

00:01:18.000 be like was it godzilla and the other one moth moth whoever it is that godzilla fights is going

00:01:24.340 to be them two competing to take over every fiber of our being in this country and um i mean our

00:01:33.260 pension system is is not wildly different really at the end of the day to any other g7 country so

00:01:39.860 even if you're not english you can probably watch this one because um you know you can you can see

00:01:45.420 the folly of making any government line item something that cannot be touched when it's this

00:01:52.260 generous. So let's start off with a bit of background on UK pensions. I think they were

00:01:55.700 introduced by Lloyd George in 1908. It was introduced for people over the age of 70 and

00:02:02.860 life expectancy at the time was 50. So you had to be 20 years over the average life expectancy

00:02:10.420 in order to get any pension and it was about 15 percent of a working man's wage back then and it

00:02:18.540 was also means tested so if you were wealthy enough you didn't get it now back then um and

00:02:26.480 i always remember this my my history classes at school uh the the old people who got it the hand

00:02:31.620 the tiny number of old people who actually got it were so grateful because they were both poor and

00:02:37.480 old they were so grateful they'd make like little cakes and stuff and take them to the people at the

00:02:42.880 post office where they got their pension and you know they're just just enormously grateful for it

00:02:47.300 it's become an entitlement at this point and people just think well you know because I paid

00:02:53.480 into the system to pay for somebody else's pension I'm therefore entitled to to my pension when it

00:02:58.520 comes and it should be as generous as possible in fact I should be able to maintain a standard of

00:03:03.880 living, which is more or less comparable to my working days with it, which was never the original

00:03:11.600 intention of the thing. The particular issue comes with this triple lock pension thing.

00:03:17.560 So what triple lock actually means is that it will always rise by the, what is it? It rises by

00:03:25.620 either CPI, so inflation basically, it rises by average earnings growth or if none of those are

00:03:38.300 higher than 2.5%, it goes up by 2.5%. So it's not smoothing across time. It's looking for the

00:03:49.140 maximum out of any three of those variables and it's picking that one. So you've got this

00:03:55.220 sort of eternal upwards ratchet now it was introduced in the triple lock in its current

00:04:01.560 form is introduced in 2010 um under i think there was a coalition but yes it would have been it would

00:04:08.020 have been the coalition government with the lib dems and the tories and the situation they're

00:04:12.140 looking at there is the pension had fall the pension level had fallen relative to earnings

00:04:17.240 for most of the last decade and so they wanted to do something for pensioners they thought okay

00:04:23.680 fair enough that you know these people they they vote in 2010 you would have had the baby boomers

00:04:30.000 a number of them um already retired but certainly the the bulk of them on the verge of retirement

00:04:36.240 before the next parliament of five years and so it was a quite nice easy way to get some extra votes

00:04:42.540 and the the logic at the time was well you know we're going to re-anchor it to to earnings but

00:04:48.120 we're also going to protect against inflation and we're also going to guarantee that you get

00:04:53.040 at least something if workers don't get anything and we don't print enough money that year.

00:04:58.920 So, you know, enormously successful politics. The older folk, of course, voted for that.

00:05:08.500 And well, let's track how it is. Before I do, let's have a look at link one. I've got, let me

00:05:13.460 see if I can call up a link. Here we go. Link one. Hopefully my editor can show that to you as well.

00:05:19.040 the slightly galling thing about it is that a lot of people are defending it now

00:05:24.500 on social media and in newspaper articles and the rest saying well you know this is this is an

00:05:29.920 entitlement you know we should get this and the reason the the baby boomer generation that gets

00:05:34.400 a bit of stick on this is because the basically the baby boomer generation was so large they have

00:05:38.620 always gotten their way whenever whenever they have been uh you know of whatever age they are

00:05:45.880 policy has adapted to benefit that generation because it was so large it had so much voting

00:05:52.060 power and actually if you go back to the um the 80s what does it what does this say so so in the

00:05:56.940 80s pre-80s pensions were generally linked to growth in average earnings okay fine and then

00:06:03.080 when the when the baby boomers really came into their own when their propensity to vote gone up

00:06:08.780 enough and plus their generation size that they were dominant uh the thatcher government broke

00:06:14.340 the earnings link and switched to price indexation which would have which is actually fairly sensible

00:06:19.220 back then um because they weren't they weren't why there was inflation but they weren't wildly

00:06:24.740 printing money back then um and what does it say 1980 to 2010 pensions were uprated in line

00:06:31.200 with price inflation only as earnings generally grew faster than prices this caused the state

00:06:37.360 pension to decline from roughly 26% of average's earnings to 16%. And that's when the pension

00:06:44.500 triple lot came in, just as that baby boomer generation were reaching their retirement point.

00:06:50.960 So that does get a few people slightly annoyed, because the baby boomer generation, they took

00:06:59.420 away when they were in voting ascendancy, they took it away from, well, they weakened the

00:07:06.460 mechanism when they were the politically dominant block and when they got old they then they then

00:07:13.620 brought it back with spades and triple locked it and concreted it and nailed it down with golden

00:07:18.340 nails which which is possibly a little bit off pensions are now in in in terms of the earning

00:07:25.280 link they're 14 percent higher than they were when the when the triple lock was brought in or

00:07:29.440 1,300 pounds per year is how much they're higher and you know the recent uprating and I think I've

00:07:40.500 got a link that I can show you but what you've had since then is you've had periods of inflation

00:07:47.420 spikes where the real wages of workers has gone down because of course if prices go up and your

00:07:55.100 wages don't, then your real pay has effectively decreased. So when we've had inflation spikes,

00:08:01.780 workers have got poorer. But because the triple lock is inflation linked as well as earnings

00:08:09.220 linked, the pensions, they get the benefit on both sides. So they go up by whatever the inflation

00:08:16.060 rate was. So they don't really see that. And then what happens after an inflation spike is that the

00:08:23.400 employees then catch up, often not quite as much. And then so they go up and that sort of makes them

00:08:31.560 all right a little bit for the inflation that's happened, even though they've lost out several

00:08:35.320 years and wages never normally catch up to the level of inflation. But the pensions benefit

00:08:41.880 twice. So they completely absorb the inflation spike. And then they get the earnings spike as

00:08:46.220 well. So they kind of double dip on that. And then if you have a period of low inflation and

00:08:51.520 you know wage compression well they still go up two and a half percent anyway which is you know

00:08:54.880 quite a good pay rise for for a perfectly normal year so the um you know it it and it's been adding

00:09:02.840 what has it added it's i think it's added about 12 billion to the to the pension bill indexed so

00:09:10.540 so um inflation adjusted is that a 12 billion against where it was and it's probably going to

00:09:16.640 go up by another four billion um by by 2030 in terms of cost so you know that's half a percent

00:09:25.580 of gdp that the pension bill has gone up and um you know i'm not even into taking into account

00:09:32.960 the bloody demographics there which is the baby boomer generation is aging out and they didn't

00:09:36.700 have enough kids they should have all had if they wanted to have a pension like this they should

00:09:40.560 have all had three or four kids minimum they didn't um we just imported a load of people

00:09:45.940 instead and now they're going to get old and they're going to want it as well so that is a

00:09:50.960 bit unfortunate now i mean what what's so great about the the pension triple up for the benefit

00:09:56.280 of retirees you've got three well you've got two volatile series and then a save inflation as we

00:10:03.700 have seen can be volatile and then and then of course if inflation is going to be volatile well

00:10:08.400 the earnings are going to be volatile and then you're going to get an increase anyway so if

00:10:12.180 you got two volatile indexes and you always get the better of them or two and a half percent i

00:10:17.160 cannot tell you what i would give as an investor to have that if if i could have in my portfolio

00:10:23.080 a system where i could pick say i don't know bitcoin and something that didn't correlate

00:10:29.280 well with it um well i mean everything correlates the correlation of everything is going to to one

00:10:34.900 at the moment. But let's imagine that gold miners, for example, gold miners, well, they are

00:10:45.080 volatile stocks, and they didn't correlate well with Bitcoin, that I could have, if Bitcoin goes

00:10:53.620 up, I get that. If gold miners go up, I get that. And if both of those are down heavily, will I get

00:11:00.100 two and a half percent i mean that is i mean that is enormous i mean that that is hugely

00:11:04.880 beneficial in fact let me let me pull up the um uh the attachment thing that i wanted to show you

00:11:10.140 oh yeah here we go so um yes look at that that is what's it showing so inflation is the green line

00:11:16.260 earnings is the black line and yeah you can see what i mean here so and you've got oh you've got

00:11:23.380 a line across the middle so when when both of those are below you get the two and a half percent

00:11:27.400 if you are the worker you get the the black line minus the green line so actually you you've

00:11:36.120 probably i mean if you net those out i mean i'd need a computer to do that but you're probably

00:11:41.520 going to be a flat line that just declined slightly down here we know actually be below

00:11:46.180 the zero line wouldn't you'd probably have a line that just goes you know i don't know if you can

00:11:49.500 see my mouse but just but just goes down on like a 10 angle below the line whereas from a pensioner's

00:11:55.500 point of view well look if if if the green line is high we take that if the black line goes over

00:12:00.560 as it does here when it catches up okay we'll take that anyway it's just a it's just a massive

00:12:05.680 win so you can see why the pension costs are soaring up um by billions at a time when we don't

00:12:12.920 have billions so you know it's effectively it's double dipping on the same economic factors

00:12:20.360 because whatever leads you to to drive up inflation well almost certainly with a 12 to 18

00:12:28.520 month lag earnings are then gonna they're gonna have a catch-up period after it in fact in fact

00:12:32.780 this chart shows that doesn't it shows that with the um the covid era yeah so inflation um started

00:12:40.600 to spike there was a catch-up with wages and then wages dropped off because everybody got a pay cut

00:12:45.920 then inflation surged again and then fell off sharply.

00:12:51.920 But then you got the pay increase to reflect the inflation

00:12:56.740 that had previously come.

00:12:58.700 I mean, wonderful system, if you can get it.

00:13:00.760 The problem is we can't afford it.

00:13:04.080 So, you know, and ultimately what this is, right,

00:13:07.820 is this is a transfer.

00:13:11.320 It's a political mechanism to shift wealth

00:13:13.760 from one group of people to another.

00:13:15.100 in this case you know from young people to old people but what how else could you describe those

00:13:22.740 two groups and be accurate you know not not at every level i'm sure there's there's some pensioners

00:13:28.600 that are living in poverty and some 22 year old footballers who's earning millions but certainly

00:13:34.040 at the median level what you're doing is you are transferring money from from poor people to rich

00:13:38.400 people and that that's probably not really on and it's happening because the old people um there's

00:13:45.440 both a lot of them and they turn out and vote so yes not ideal you know pensioners they are

00:13:55.000 the most reliable voting block particularly um the baby boomers because if you are a baby boomer

00:14:04.520 whatever the mass of your generation has wanted you have always got throughout your entire life

00:14:12.020 um you know policies were catered more towards the young when when when you were young and now

00:14:17.900 policy is very much catered towards the old now that you are old from your point of view voting

00:14:24.720 works you know you might not got exactly what you wanted but at the median level for your generation

00:14:30.820 they have always got exactly what they wanted so not only are there a lot of you but your

00:14:36.000 propensity to vote is high and so you know parties have repeated repeatedly committed to this

00:14:43.580 so it was a coalition then it was just the tories they kept on committing to it then it was labor

00:14:48.720 you know they keep committing to it reform have just committed to it but every treasury model

00:14:54.120 shows even the ones at the beginning that it is unsustainable the first treasury projection on

00:15:02.120 the triple lock showed that it was unsustainable and the the the line at the time is well we just

00:15:07.640 do it we just do it for two or three years to to catch things up and then of course we get rid of

00:15:12.140 it but then an election comes along and they say okay well we won't do it this parliament but we

00:15:16.400 do it the next parliament so so four to five years go by um and then they try to get elected again

00:15:21.260 of course they do it again

00:15:22.900 and reform are doing this now

00:15:24.660 they're doing it again

00:15:25.400 it's a trap

00:15:27.260 you can't get out of it

00:15:29.100 it's the

00:15:30.440 it's the

00:15:31.520 you know

00:15:32.480 classic median voter

00:15:33.800 with asymmetric turnout

00:15:36.520 trap

00:15:36.980 so what are you going to do

00:15:38.080 I did

00:15:39.220 I did find another

00:15:40.140 can we have link three

00:15:41.400 so here we go

00:15:42.300 so link

00:15:42.880 Desmond Swain

00:15:44.600 has decided to pick this one up

00:15:46.480 he is a

00:15:48.640 very boomery boomer

00:15:50.860 being born in 1956.

00:15:53.120 I mean, that is peak boomer, that is.

00:15:55.280 He is the one other MP than Rupert Lowe

00:15:58.260 that I actually like, Desmond Swain.

00:15:59.960 He's good.

00:16:00.920 He's still a Tory.

00:16:03.200 He should go and join Rupert Lowe, shouldn't he?

00:16:07.260 Soon as Rupert's Lowe thing gets some legs,

00:16:11.120 Desmond Swain should go over.

00:16:12.620 He's great.

00:16:13.400 He was very strong against the COVID nonsense as well.

00:16:17.980 So I like Desmond.

00:16:18.700 And he picked up the issue here.

00:16:20.160 He's saying, look, I am fortunate I was born in 1956, lucky me, the Centre for Policy Studies

00:16:28.440 calculated that the average person born in that year in their lifetime will secure from the

00:16:34.580 benefit system just shy of £300,000 more than they ever paid in taxes. This largesse is unsustainable

00:16:42.780 by the benefit system. One significant component of the state pension with its increasingly

00:16:47.960 expensive triple lock of course maybe pensioners will be surprised and i'm i'd imagine he goes on

00:16:53.660 to say that they were never they were never funding their own pensions um he's almost certainly going

00:16:58.460 to say that they were um simply paying out for the pensioners that were um pensioners when they

00:17:05.100 were in working age the problem is is that the generations that preceded the baby boomers were

00:17:10.020 small generations i mean the only reason why the baby boom happened in the first place is because

00:17:14.660 for whatever reason

00:17:16.480 having a world war

00:17:17.380 makes everybody

00:17:18.060 incredibly randy

00:17:19.020 and they all came back

00:17:20.040 and had like

00:17:20.540 five or six kids

00:17:21.380 not exactly sure

00:17:22.480 how that works

00:17:23.000 I think Ed Dutton

00:17:23.980 has tried to explain it

00:17:24.920 to me

00:17:25.080 there's some sort of

00:17:25.560 evolutionary thing

00:17:26.480 where when everything's

00:17:27.540 falling apart

00:17:28.180 you're like

00:17:28.400 oh goody

00:17:28.840 let's have kids

00:17:29.460 but anyway

00:17:30.800 so that's how that works

00:17:32.100 but yeah

00:17:33.580 as what is he saying there

00:17:35.560 300,000 pounds

00:17:37.320 is

00:17:39.300 is the

00:17:40.640 is the transfer

00:17:42.000 from

00:17:44.040 from young people to old people over the course of the lifetime of um of a baby boomer not born

00:17:53.160 in 1956 and and and this has been a generation that was able to get um housing at a reasonable

00:18:01.440 rate um as they are fond of reminding us um you know they didn't have it easy you know they had

00:18:09.040 to you know they had to do an extra paper round or something for a couple of weeks in order to

00:18:13.160 to get the deposit for their first house and you know they they had to eat baked beans for the

00:18:18.080 first couple of weeks um because they just bought a house and um you know they didn't have foreign

00:18:23.120 holidays they didn't have netflix they didn't go to um barley um for raves and stuff like that so

00:18:29.480 they sacrificed an awful lot but they did get a a four or five bed house in surrey with a massive

00:18:34.820 garden and a huge driveway so you know things and roundabouts i suppose um but anyway so yeah

00:18:40.720 the boomers will tell you they're very hard done by but as as desmond there had pointed out

00:18:44.840 well they are they're getting 300 grand transfer um from the state and that is coming from somebody

00:18:55.280 from somewhere where is it coming from it's coming from everybody who isn't a boomer um

00:19:01.560 predominantly at this point the young because most of the most of the largesse that you will

00:19:07.200 you will get um over your lifetime in our system is going to be the pensions and nhs because the

00:19:14.920 nhs is overwhelmingly i mean i know the nhs does see younger people it does the handful of births

00:19:21.240 that we still have in this country and if you get run over when you're 22 you know it will it will

00:19:25.920 do something for you there but overwhelmingly the nhs is a is a elderly um care service um it's a

00:19:33.340 pensioner care service ultimately and of course that's that's that's pensions as well we've got

00:19:37.720 something which is going to break i mean it kind of has to because pension spending is already 140

00:19:42.360 billion annually and it is crowding out things like defense and so we have to upset mr trump

00:19:51.120 because he wants us to spend more on defense and we can't because we've got boomers instead i mean

00:19:56.200 they've got them as well but nothing stops the american spending money on blowing people up they

00:20:01.020 they quite like that it's crowding out capital investment it's crowding out you know young

00:20:05.460 cohort spending of whatever that would look like you can imagine that if if the millennials were

00:20:11.320 proper let's say the baby boomers had all had five or six kids like their parents did the

00:20:17.540 millennials would be i mean they'd just be voting themselves um free child care um help getting a

00:20:25.860 first house um help buying a first car i mean all of that stuff they they they would be loading up

00:20:31.360 on that stuff but you know they're but they can't because there's not enough of them and but but

00:20:36.280 yeah and so so what we're creating here is a system of quite real generational um tension

00:20:43.440 because there is money being transferred to people who are fairly wealthy and workers are facing you

00:20:50.080 know higher taxes and lower asset ownership you know they're not they're not getting their homes

00:20:54.640 and and the pensioners are getting guaranteed real growth with two opportunities for bonanza bonus

00:21:01.360 and and that bonanza bonus will normally come over the period of a three-year

00:21:05.600 bonanza because what you'll typically see is 18 months of high inflation followed by 18 months of

00:21:11.720 of high wage growth so so you know you're going to get at least two and a half percent and then

00:21:17.940 every so often you're going to get a three or four year period where it just where it just rockets up

00:21:21.720 The government isn't actually legally bound for the triple lock.

00:21:25.180 We're not America.

00:21:25.960 We don't – when we do these things, you know,

00:21:28.460 somebody just stands up in Parliament and announces it.

00:21:30.980 We don't write everything into law with an act of Congress

00:21:34.960 the way the Americans do.

00:21:36.060 I mean, the Americans are in a horrible mess

00:21:37.800 when they want to sort out their fiscal situation

00:21:40.840 because they've written it all into law, which is a bit silly.

00:21:45.400 Don't do that.

00:21:46.200 Well, I suppose they pass its bills.

00:21:47.540 Don't they pass budget bills?

00:21:49.160 Yeah, we just do a budget and then we vote on the budget.

00:21:51.720 Are you happy with the budget, yes or no?

00:21:53.300 And if they say no, then you're effectively kicked out of government

00:21:56.160 because you can't pass a budget.

00:21:57.460 What can you do?

00:21:58.960 Pension triple law isn't just generous.

00:22:04.700 It's structurally anti-cyclical in the wrong direction.

00:22:09.020 When workers are stressed, pension goes up quite a lot.

00:22:11.980 When workers get some relief, which, of course,

00:22:15.920 imposes more cost of businesses, the employers are squeezed.

00:22:19.820 so it's either workers getting squeezed or employers getting squeezed and pensioners are

00:22:25.980 just like brilliant here for that they're getting all of that um yes so there's that um

00:22:33.640 current pension so there's actually two um pension schemes that are sort of live at the

00:22:40.400 moment there's the pre-2016 one which was a little bit more complicated and if if you are on that one

00:22:47.400 if you retired before 2016 you are getting 184 pounds 90 from your pension um but it's not quite

00:22:57.240 as easy as that because you you probably had um a secondary state pension another scheme on it and

00:23:04.380 that's a bit more variable so i won't guess the numbers but but but the new pension if you retired

00:23:10.240 after 2016, you're getting £241.30 a week, which translates into £12,548 a year. So

00:23:27.560 £12,500 a year, you're getting £250 odd a week in your state pension if you retired

00:23:36.200 after 2016 and oh there are some rules with it so you basically need a minimum of 10 years work

00:23:45.200 to get anything at all and you need to get the full pension the full 241 80 you need to have paid

00:23:53.320 in your national insurance for 35 years which isn't that difficult to do I think I think now

00:23:59.700 what am I now I've been working for 26 years so I think I've got all my years I must have

00:24:05.060 um so i only need to do nine more god nine more years in swindon maybe i can find something else

00:24:13.940 to do maybe i'll just work around the shops or something in in winchester but anyway um you get

00:24:18.820 your 35 years of um national insurance contributions and then then you get the full state well i mean

00:24:23.980 i won't get a full state pension anyway because it's all going bust long before i retire i'm a

00:24:28.200 young gen x the youngest gen x that you can get on the last year so the chances of me getting any

00:24:32.520 this i think is is absolutely remote especially we carry on with this i mean it's just going to

00:24:36.440 bloody implode as i'll get to the numbers later and and i i think it's a linear arrangement between

00:24:41.240 the number of as soon as you cross the threshold of 10 on your way to 20 35 it's just a linear

00:24:47.780 arrangement so you get one 25th of the total for every year over 10 if that makes sense that should

00:24:55.460 make sense so structurally what is it i mean ultimately what is this line item on on the

00:25:01.460 government's um p and l i mean it is a benefit it's it's a pay-as-you-go system funded by the

00:25:11.460 current workers national insurance a lot of the way a lot of the time uh when people speak about

00:25:18.120 this when retirees speak about it they say i've been paying in for however many years 40 years

00:25:24.280 they'd say um and now i'm taking it out well no you're not because what that what that conjures

00:25:29.840 up is the illusion that they were paying into a big sovereign pot sovereign sovereign wealth fund

00:25:35.220 of some sort a big pot and it was a little ring and it was all ring marked and it was you know

00:25:40.340 gladys gladys smith here um you know here's a little pot and she's she's been filling it up

00:25:47.660 all those years and all she's going to do now is draw it back down again not how it works in

00:25:52.560 life is Gladys was paying for Edna, whatever a classic greatest generation name would be.

00:26:01.360 So Gladys is paying for Edna. And then when Gladys retires, she's getting paid for by

00:26:09.200 current workers paying their national insurance. There is no pot at all. So it is a benefit.

00:26:16.400 It's part of the welfare system. They get very upset when you tell them that,

00:26:20.000 but it is part of the welfare system.

00:26:21.840 if you enjoyed that content and of course you did because you are a smart person then why don't you

00:26:27.040 go over to lotuseaters.com where you can watch the whole episode for as little as five pounds

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The Podcast of the Lotus Eaters - April 21, 2026

PREVIEW： Brokenomics ｜ Triple-lock pensions

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