View more on these topics

Nic Cicutti: Pensioners are taking the rap for political failures

Nic Cicutti

Former US defence secretary Donald Rumsfeld’s famous “unknown unknowns” perfectly describes the current situation with regard to the basic state pension. Last year, I was privileged to be invited to Money Marketing’s 30th anniversary dinner, in which long-standing contributors were asked to speculate on what would dominate debate in the next 30 years.

During that dinner I had the temerity to criticise the complexity of the state pension system. Despite its apparent simplification by moving to a single unified rate for pensioners, I argued the system left millions baffled as to the actual amount they were entitled to – while also paying a significant number far less than the promised headline rate of £155 a week.

To my surprise, I was rebuked for saying this by SimplyBiz group chairman Ken Davy who informed diners that he had been one of the advisers to the Conservative Party on this topic and that the system was perfectly easy to understand.

Last week, my fellow Money Marketing columnist Paul Lewis indirectly eviscerated Davy’s confident assumption, wittily describing it as “the flat-rate pension that is paid at more than 20,000 different rates”.

Paul continued: “You need 35 years’ worth of National Insurance contributions to get the full flat-rate new state pension of £155.65, but even if you have paid that much you may get less than the full state pension. More than 1.7 million people reaching state pension age in the next 10 years – about one in three – will be affected.”

Many of them will be people who, without realising it, were contracted out of Serps through their occupational pension schemes. Others did so because they were advised to contract out and place their NI rebates into a personal pension.

Paul’s comments reflected a report by the National Audit Office last week, which stated the Department of Work and Pensions’ attempts to improve understanding of the pension system had failed – despite a radical overhaul of the system.

Even more significantly, the NAO noted, the DWP was failing in respect of a key driver for the reforms to the system: “One of the department’s objectives of state pension reforms was to prompt people to take action and plan for their retirement from a younger age,” the report said. “But there is not yet any evidence that the new state pension has encouraged people to save more for their retirement.”

The Government’s growing pains

I also suspect an element of deliberate political calculation: by continuing to link the amount of state pension on a set of arcane computations that no one understands, the Government is atomising the pensioner population, preventing effective comparisons based on a common expectation of equal pensions for all.

A similar salami-slicing tactic is being used against so-called Waspis, hundreds of thousands of women born between April 1953 and April 1956 who are affected by the accelerated raising of their retirement ages in 2011.

Which is how I also view demands to scrap the triple lock on state pensions. For the past few months there has been growing clamour for this simple measure, which had barely begun to address the problem of low incomes for pensioners, to be scrapped.

Last week it was the turn of MPs on the Work and Pensions committee to argue that continuing with the triple lock is “unsustainable” and “unfair” on younger families.

Leave aside the irony of a hugely privileged occupational group whose own pensions are paid at 50 per cent of their final salary after a mere 20 years in the job telling millions of pensioners that their own pathetic future incomes should be cut in the interests of “fairness.”

Pensioners are taking the rap for a failure of both Labour and Tory governments to provide low-cost social housing and ensure decently-paid employment for millions of citizens.

Nevertheless I suspect that MPs are pushing at an open door. Over the past few months it is evident there has been a political softening-up process in respect of the triple lock, led by Ros Altmann and supported by former Work and Pensions Secretary Iain Duncan Smith. The guarantee to keep it in place will only last until 2020.

Donald Rumsfeld’s phrase about “unknown unknowns” left out an important element: what we prefer to remain unknown and swept under the carpet. In this instance, it is the fact that continuing confusion over the state pension system and the abandonment of meagre measures to address many decades of unfairness will neither protect pensioners against poverty, genuinely address so-called “intergenerational unfairness” or make it more likely that people will save for their retirement.

Nic Cicutti can be contacted at



Nic Cicutti: Who will be left behind by state pension reform?

At what age should people be able to retire and still draw a full state pension? This question has resurfaced following an interim review into the state pension age by former CBI director general John Cridland, published last week. The report does not formally suggest any particular date; for that we will have to wait […]

The Rubik’s Cube: China’s policy trilemma

By Douglas Turnbull, Investment Director, Head of Chinese Equities China faces a ‘Rubik’s Cube’ policy trilemma, whereby it needs to sustain a minimum acceptable level of growth, deal with issues such as overcapacity and reform the financial system to make it a far more efficient allocator of capital. Given the contradictory nature of these objectives, […]


News and expert analysis straight to your inbox

Sign up


There are 7 comments at the moment, we would love to hear your opinion too.

  1. All the pensioners in D B schemes will probably be ok.
    The big problem is that most are not so fortunate.
    Inflation for older people is magnified as they spend very differently.
    The triple lock should be means tested.

  2. One is left wondering how the Regulator would view such shennanigans if it were the private sector providing this sort of service. Perhaps people in glass houses…….

  3. …but it’s ok for those of us still working (that’s me) or just starting to work (that’s my son), and our employers, to pay double digit NI contributions to fund those who paid peanuts and are getting a decent pension with a decent guarantee of maintaining it’s buying power until the day they drop dead. Ah, the ‘golden generation’ (that’s my Mum and Dad!), how lucky they are.

    Comedy journalism, rather than sensible debate, as I have come to expect from Nick over the last 30 years.

  4. The facts are the facts. In 1909, men aged 70 were given a state pension, but the average working man could only expect to live to 48 years of age and so there was very little demand for the state for pensions.

    Today in 2016, girls born can expect to live to 82.8 years and boys 79 years. Government spending has been stimulated by government debt not earnings. Some really do think they can vote against out of ‘austerity’ as if it is an imposition by a capitalist elite. I’m afraid those that do are at best naïve or perhaps of a left leaning persuasion (perhaps the same). In any case their policies would actually destroy our system and result in an imposition of austerity by a third party. There is no state pension only state taxation now and for future generations. Unfortunately, our ageing population and decreasing working population has already outstripped affordability.

    I doubt the working populace would be willing to fund an earlier and more arguably privileged generation of retirees, especially when many youngsters have experienced a lack of housing and unemployment.

    Despite conventional wisdom many over 65 are actually quite wealthy! 63% of households 65-84 are owner occupiers and mortgage free, with an average wealth in excess of £250K and when pensions are included average total wealth is £400,000. Average gross pensioner incomes increased by 39% in real terms between 1994/95 and 2006/07, twice the national earnings.

    • I don’t know where your figures come from but at 70 I consider myself very lucky that with my state pension plus works pension I get just over £14,000 a year. I own half my house – my daughter and son-in-law own the other half, it is valued at approx £110,000. There are many, many more people living on just the state pension.

  5. I never thought I would admit it but I, largely, agree with Nic Cicutti on this occasion. I am still working, Like Gavin Hawdon, and my daughter is now working, like Gavin’s son. However I still believe that this country is wealthy enough to provide decent pensions for our elderly. The main problem is that the money in this country is given to the wrong people and institutions, in tax breaks etc.
    A lot of people really don’t mind paying a bit more in tax to live in a better society. Pensioners have paid their contributions and, at the time they were paying them, it probably seemed expensive to them as well. Don’t forget that, if house prices in some parts of the country were a lot lower than they are (partly due to various governments failing to deal with the issue over the years) our kids would be a lot better off. Also, a lot of employers treat their employees with disdain and pay lower wages in order to benefit shareholders and directors.
    I know we are where we are, with public finances, but we don’t have to be there forever. It means a major change in government and public attitudes though.

  6. A good point to raise public finances, which appear to be out of control. Following the resignation of David Cameron, look at the overly generous payments made to his staff; the six figure overtime payments made within the NHS; the payments made following NHS excecutives resigning after being criticised in reports; the daily rates paid to the abuse enquiry legal team and the list goes on. A major change in attitudes and culture is needed and fast.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm