PFS chief: Good ideas on the state pension are going to waste

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Much has been debated in recent weeks about how to ease the pressure on an unsustainable state pension.

According to the Centre for Policy Studies, spending on the state pension has risen by 25 per cent over the past six years to £86bn.

With more than a million people joining the over-65s demographic in the next five years, there is an urgent need for reform. So I was surprised when a recent proposal from the thinktank was immediately dismissed by a number of market commentators.

The proposal, published earlier this month, suggested the state pension be put into “run-off” from 2020 and replaced with a workplace Isa, available from the age of 65. A means-tested senior citizen’s pension would then be made available from the age of 80.

The proposal is complex and is one of a number of recent ideas that risks being ignored due to pocketed groups of opposition and political risk. Another is the recommendation from the Work and Pensions select committee that the triple lock be scrapped by 2020 and replaced with a more affordable earnings-linked system.

The committee noted the millennial generation faces being the first in modern times to be financially worse off than its predecessors.

But already there is skepticism around any real action being taken due to the Government’s potential concerns about hitting pensioners ahead of the 2020 election.

There is clearly no shortage of reform ideas but it remains to be seen if there is the political will to proceed with change that will agitate a politically-engaged segment of the electorate.

I hope the Government recognises how important it is that pension regulation be considered in the context of long-term social and economic trends, rather than be treated as a political football. We owe it to our children and grandchildren.

Keith Richards is chief executive of the Personal Finance Society