An end to the State Pension Triple Lock? Here’s why I’m not worried

Recently, new Prime Minister Andy Burnham announced that he plans to get rid of the State Pension Triple Lock. This is a mechanism that ensures that annual State Pension payouts rise by whatever is highest out of price inflation, average earnings growth, or 2.5%.

Now, this is going to upset a lot of people. However, personally, I’m not worried about the changes – here’s why.

I was expecting this

I’ve been expecting to see an end to the Triple Lock feature for years now. I’ve written about how it could potentially be scrapped a number of times.

Ultimately, it has a few flaws. For example, not only does it cost the government a ton of money but it also places an unfair burden on younger generations due to the fact that the State Pension is paid from current workers’ taxes and average earnings growth is the single most likely component to dictate the annual increase.

It’s worth noting that Burnham still wants to regularly increase the payout, and his plan would see it increase every year at least by inflation, or 2.5%. So it isn’t like it’s going to be frozen forever at today’s level. This is reassuring.

It isn’t hard to build a retirement pot

I’m not worried about it being scrapped for several reasons. One is that the UK offers some of the best retirement savings vehicles in the world. For a start, there’s the Self-Invested Personal Pension (SIPP). Pay into this and the government will top up your account as a reward for saving for retirement.

Then, there’s the Stocks and Shares ISA. With this account, we can invest up to £20,000 a year and pay no tax on gains or income.

With these kinds of accounts, it isn’t hard to build up a retirement savings pot. Ultimately, you can take control of your retirement.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

So many opportunities to make money

Next, there are tons of opportunities on the London Stock Exchange (LSE) for investors. Whether we’re talking about dividend stocks, growth stocks, investment trusts or ETFs, there are so many ways to make money today.

It’s the same story with the US market (US stocks can be held in an ISA or SIPP). This market’s literally a gold mine.

This fund returned 17% a year over a decade

As an example, take a look at Scottish Mortgage Investment Trust (LSE: SMT). This is a tech/growth-focused investment trust that’s invested in companies such as Amazon, SpaceX, and Nvidia and trades on the LSE.

Over the last decade, its share price has risen from 335p to near 1,600p. That translates to gains of about 17% a year on average.

Now, past performance isn’t an indicator of future returns, of course. However, let’s say that over the next decade it was able to return 12% a year. That would turn a £20,000 investment today into more than £60,000. That’s roughly four years’ worth of State Pension payments (I’m factoring in ongoing increases to the payout here).

It’s worth pointing out that this trust has historically exhibited high levels of volatility due to its growth focus. I’d expect this to continue.

Taking a long-term view however, I reckon it will continue to do well. So I think it’s worth considering as an investment.

Should you invest £5,000 in Scottish Mortgage Investment Trust Plc right now?

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Edward Sheldon owns shares in Scottish Mortgage Investment Trust, Amazon, SpaceX, London Stock Exchange Group and Nvidia.