The UK should cut the state pension for the wealthy and “free up resources” to give a boost to poorer retirees, a member of the Organisation for Economic Co-operation and Development has stated.
The OECD’s deputy director of employment, labour and social affairs Mark Pearson said by dropping the state pension for the 5 to 10 per cent of the richest citizens would give a significant boost to the pensions of the poor amid Britain’s ageing population, the FT reports.
Pearson said: “Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?”
He added: “Or another way to ensure an adequate pension is to think about whether the pension should only be paid to those who really need it, to ease the tyranny of the maths. Giving less [pension] to the people at the top would free up resources to increase general benefits.”
The UK retirement benefit currently stands at £6,359 a year for the basic state pension, and £8,296 for the new state pension, which was introduced last year. The OECD claims this is among the least generous benefit of its 35 member countries.
Menawhile, the Office for Budget Responsibility expects spending on the state pension to rise from 5 per cent of UK’s GDP in 2021-22 to 7.1 per cent by 2066-67.
Pensions is also expected to be a key element for debate in the June’s general election in the UK, especially on the fate of the triple lock – a guarantee to increase the state pension every year by the higher of inflation, average earnings or 2.5 per cent.
Pearson said the triple lock should be scrapped altogether because pensioners gain an advantage over other groups, suggesting state pensions should increase by either average earnings or prices.
Royal London director of policy Steve Webb disagrees with Pearson.
He says: “What happens to the rich has a knack of spreading and you could end up undermining the whole idea of a contributory system.”