14 August 2025: The pension age must be raised to 70, and the triple lock ‘changed’ to save the economy

It has been ten years since the UK voted to leave the European Union, yet the topic remains a source of intense debate at all levels of society.

For individuals, it has become an age determinant, with the younger generations wishing to become far more integrated with Europe. At the same time, their parents and grandparents cling to the view that the United Kingdom should be strong enough to stand alone, given its values and traditions.

For business, the situation is significantly more complicated. Doubtless, there are many directors of companies of all sizes who carry a personal antipathy towards the EU and all its bureaucratic ways, but understand that it is better to be “inside the tent looking out, than outside the tent looking in”.

Sir Keir Starmer’s government would like the UK to have a far closer relationship with Brussels, but typically, he does not wish to step on any toes, despite having a Parliamentary majority that should allow him to act far more boldly than he has in his first year in charge.

There have been several conversations taking place about the ongoing relationship, but as far as business is concerned, the country needs to be fully in or fully out and not perform some form of “hokey cokey” which will be even more distracting than it is already.

The Chancellor is receiving a constant stream of advice regarding the measures that should be taken to improve living standards, even though she is hamstrung by her continued adherence to her self-inflicted rules regarding levels of public borrowing.

These rules, in which day-to-day expenses have to be “covered” by day-to-day income, hark back to a simpler time and, while laudable, appear a little outdated, particularly with today’s economic landscape.

To comply with the financial straitjacket she insists on wearing, Rachel Reeves is considering several policy changes in her Autumn statement, which fall into the category of potential banana skins.

The raising of the retirement age to seventy would appear to be a sensible change, given how the average lifespan has now gone well beyond the “three score years and ten” that was the considered norm, and many people are choosing to continue to work since the current private pensions rules did not exist when they were at their peak earning potential.

Nonetheless, increasing the retirement age is political dynamite, as has been seen in France recently.

Furthermore, and perhaps even more controversially, any change to the “triple lock” on the level of pensions is also a guaranteed vote loser.

Reeves feels the need to solve the issues of the country all at once, when it would seem a far more sensible solution to announce an increase in the retirement age, but defer its implementation for at least five years.

Yesterday, the pound again rose to challenge its short-term resistance level at 1.3580 and looks likely to exceed that level this week. It closed at 1.3573, but there is a slew of economic data around the country’s economic performance, including GDP numbers, which may see it lose ground again.

President Trump still takes time out from “saving the world” one crisis at a time to deride the Federal Reserve and its Chairman for not having cut interest rates earlier this year, even as the economy has performed in such a way that lowering inflation was a priority for the Central Bank.

His latest threat to Jerome Powell is to sue him for the apparently excessive level of spending on the renovations of the Federal Reserve’s head office building.

Trump said in a Truth Social post that the suit would relate to Powell’s management of pricey renovations at the Fed’s headquarters in Washington, D.C., which the president has previously criticised. The president did not say when that suit could be filed or by whom. “Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump wrote in the post.

He went on to tell reporters that he may name the next Federal Reserve chair “a little bit early” and added that he is down to three or four potential candidates as he looks for a successor to Jerome Powell.

Trump has hammered Powell over the Central Bank’s decision to hold interest rates steady, repeatedly calling in the past for him to resign and publicly mulling whether he should fire the chair outright before saying he would wait for his term to end in May. Naming his successor while Powell is still finishing his term raises the prospect of a “shadow Fed” emerging and risks creating whiplash for investors tracking the positions of both the current and future chairs.

The President has ramped up his pressure on Powell in recent weeks, including threatening a lawsuit on Tuesday over the chair’s handling of a renovation of the central bank’s headquarters that has drawn scrutiny for cost overruns.

Powell has remained tight-lipped over his departure and the cost overruns, since he is well aware that he cannot be held personally responsible for the time the job has taken or the costs that have been approved at the Cabinet level.

Powell is likely to push back on growing investor expectations for a September interest-rate cut, as the rate-setting committee is still divided over its next move.

Revisions that revealed weak payroll growth in the latest jobs report, combined with data indicating that inflation isn’t rising as quickly as expected, have convinced market participants that Powell won’t be able to hold off on a rate cut any longer.

Unrelenting pressure from the White House and Treasury Secretary Scott Bessent has upped the stakes. The Fed held rates steady this year, only cutting at its August meeting, worried that higher inflation would appear.

Powell may well choose his keynote speech at the Fed’s Jackson Hole Symposium to hint at changes to monetary policy.

The dollar index is still driven by the level of uncertainty surrounding the Fed’s view of the economy. Yesterday, it fell to a low of 97.63 and closed at 97.80.

The Eurozone economy is performing in a manner that suggests it is still playing catch-up over the number of rate cuts that have taken place in the past year.

Economic data has suggested that the recovery is well on the way, only for numbers from individual states, particularly Germany, to pour cold water on growing optimism.

Despite ongoing tariff and supply chain issues, European shoppers kept up strong demand, signalling a positive economic outlook. Retail sales across the eurozone grew at a stronger pace than initially forecast in the second quarter of 2025, signalling ongoing resilience in consumer spending despite economic challenges.

Data released this week showed that retail turnover in the 20 eurozone countries increased by 3.1% year-on-year in June, surpassing the earlier estimate of 2.6% This upward revision reflects a more robust appetite for goods among European consumers, supported by stable employment and easing inflation pressures.

This growth was driven by increased demand for non-food products such as clothing, electronics, and household appliances, while sales of food and beverages remained broadly stable. Experts suggest that the combination of improved consumer confidence and targeted government support measures helped sustain spending levels.

However, German investor sentiment fell more than expected in August, a survey showed on Tuesday, as disappointment over a new EU-U.S. trade deal and weak second-quarter economic data weighed on confidence.

According to ZEW, one of Germany's leading economic research institutes, the country's economic sentiment index dropped to 34.7 in August from 52.7 in July, when the United States and the European Union (EU) cut a framework agreement to levy a 15% import tariff on most EU goods.

"Financial market experts are disappointed by the announced EU-U.S. trade deal," ZEW President Achim Wambach said in a statement.

Wambach went on to say sentiment was also dampened by the 0.1% contraction in the German economy in the second quarter, as U.S. demand slowed after months of front-loading purchases ahead of the tariffs.

He added that expectations had worsened, particularly for the chemicals and pharmaceuticals sectors, with mechanical engineering, metals and automotive industries also facing severe headwinds.

In addition, the current economic situation index of Germany fell to -68.6 in August from -59.5 in July, marking a sharp deterioration in the assessment of Europe's largest economy.

The ZEW indicator of economic sentiment for the euro area fell to 25.1 in August from 36.1 in July. This decline, which missed market expectations of 28.1, reflects a more pessimistic outlook among surveyed financial market analysts. The survey also revealed a decrease in the current economic situation index, falling to -31.2 in August from -24.2 in July.

The Euro shrugged off the data to rise to a high of 1.1730 yesterday and close at 1.1705. It is finding the rarified air at these levels difficult to penetrate, with a break of the 1.1750 resistance level looking increasingly tough to break.

Have a great day!