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Paul Lewis: Can we afford the state pension?

The future of the state pension hangs in the balance as policy and data are in flux

Work and Pensions Secretary David Gauke’s announcement the state pension age will rise to 68 seven years earlier than planned would save a lot of money. Or would it?

Documents issued at the same time show that bringing forward the rise would save £74bn over the nine years from 2037/38 to 2045/46, with the total cost cut from £2.003trn to £1.929trn.

That’s a 3.7 per cent reduction which would save 0.4 per cent of the UK’s annual income (GDP).

So not much more than a rounding error and certainly within the uncertainties of forecasting. But it all plays into the “we can’t afford it” scenario some suspect is part of a long-term campaign to means-test the state pension at some point in the future.

Packing up early

Today’s 65-year-olds can expect a 24 year paid holiday at the end of their lives, with a one in four chance of it being 31 years (for men, subtract a couple of years from each).

Why should the state pay for that, the argument goes? Especially when the people paying for it are young workers, half of whom will suffer a 9 per cent graduate tax and many of whom are trying to save up a year’s pay to put down a deposit to buy a place of their own.

The state pension is an important component of how we pay for that holiday. Now worth around £160 a week – £8,300 a year – it is the bedrock of retirement savings. It is not much to live on (though more than a million single pensioners have nothing more) but it is very valuable.

To buy an index-linked pension of £8,300 a year for a single, healthy non-smoker at 65 would currently cost more than £250,000. So saving enough even to match the state pension will be very costly.

Govt brings forward increase in state pension age

Hargreaves Lansdown head of pension research Tom McPhail estimated for me that you would need to save in the region of £300 a month for 40 years to do so. That is about double the contributions going into a standard auto-enrolment pension for someone on average pay.

And at the end of it, their total income – state and private – would only be the equivalent of the national living wage for a 42-hour week.

Notching up the numbers

Can we afford to give all workers a pension that is the equivalent to saving £300 a month for 40 years? Pensioners, of course, say they are paying for it through their National Insurance contributions and, although they are not saved up, they do reach £300 a month once salary hits £38,000.

The European Union collates the data on pension spending. On that measure, in 2020, the UK will spend 7.4 per cent of its GDP on state pensions. That puts us 25th out of 28 members; well below the average 11.2 per cent of their GDP.

Can we afford to give all workers a pension that is the equivalent to saving £300 a month for 40 years?

The Organisation for Economic Co-operation and Development works out different numbers with even worse results. For someone on an average wage, our state pension replaces just 21.6 per cent of their earnings putting us 34th out of 34 countries.

France, in the middle of the table, has compulsory pensions that replace 56.8 per cent of earnings for someone on average pay. It will spend 14.6 per cent of GDP on them, double what the UK spends. Internationally, we are misers not spendthrifts.

Things look a bit better for the UK in another OECD table which counts all pensions, including occupational and personal ones too. Then we come 22nd out of 34 for those lucky enough to have a pension through their job.

Auto-enrolment is now extending pensions at work to millions more. It counts as a compulsory pension so that will push us a few rungs up the first OECD table but not many.

OECD head of social policy Monika Queisser has done the sums. She says: “We’ve looked at what would happen if the UK had the auto-enrolment scheme as a mandatory scheme, and then indeed the UK would move up to 22nd or 23rd”.

Still in the bottom third.

The fixed pension age lottery

Associate of the right-leaning think tank Centre for Policy Studies Michael Johnson is unimpressed by these international comparisons. He believes we cannot afford the state pension. GDP estimates, he says, are uncertain and countries that spend more than the UK may not be able to do so for long.

He also believes a fixed pension age is an unfair lottery. Some would draw a pension for ten years, others for 30, but all pay the same NICs.

These views are part of an upcoming BBC Radio 4 programme (Can we Afford the State Pension? 5 August 2017, midday) about the future of the state pension.

I asked my three guests whether there would be a state pension in, say, 50 years?

Monika Queisser: “Financially it must be sustainable because it is not a very high pension”.

Michael Johnson: “I would scrap it from 2020”.

Sir Steve Webb, Royal London director of policy and ex-Pensions Minister, who introduced the new state pension: “Categorically yes”.

Webb has welcomed the announcement of bringing forward the rise in state pension age. But it may not happen. The Government is not planning to change the law which sets 2046 for the age to rise to 68.

At the end of his statement, Gauke told MPs: “We will carry out a further review before legislating to bring forward the rise in state pension age to 68”.

In truth, his minority Government probably could not get such a controversial move through the House of Commons. So he will leave any modification to be made by the government in power at the next state pension review in 2023.

By then, we will have new data on life expectancy and we can decide if it is worth cutting spending by just 0.4 per cent of GDP. Or if, instead, we should try to push our way up the international comparisons and make the state pension more than half the minimum wage so the millions who rely on it can live more comfortably.

Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programmeYou can follow him on Twitter @paullewismoney

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Comments

There are 37 comments at the moment, we would love to hear your opinion too.

  1. It’s important to appreciate the distributional impact of increasing the state pension, at least in broad terms. What people – dare I say including Mr Lewis – often fail to appreciate is that increasing the state pension benefits middle and upper income pensioners. Those on lower incomes almost invariably get a marginal uplift, in part because they disproportionately have partial entitlement, but more to the point because they lose some income means-tested benefits as a result.

    So in truth the 1m with only the state pension, will not be the poor pensioners that many readers would assume to be the case.

  2. Why do many financial commentators, including Paul Lewis, forget that most pensioners have contributed all their working lives to provide for their state pension. It is not all financed by the present ‘young working’. Terry Hodges

    • Probably because they haven’t. There is no pot of money, they haven’t saved, they have been taxed and lied to by politicians, but they have known and accepted that they are being lied to.

      So if there is no pot of money and they didn’t pay enough tax during their lives to provide the services they voted for and to provide them with a pension who is going to pay, let alone the estimated £5trn debts the government have wracked up in their name?

      The answer is very simple, it’s those that will be working at the time, i.e their children, grandchildren and great grand children.

      Do you think that willingly accepting lies from politicians and continuing to vote for those bankrupting the country to fulfill promises they made to buy your vote absolves you of responsibility?

      • So view it like a conventional With Profits RAC – they’ve paid over the term for a contractually agreed income from NRD – what the Life Office (Government) does with the premiums is their affair so long as they fulfil the terms of the contract. Penalising he member for the profligacy of the Life Office is wrong. One could also argue that there has been investment in UK Limited and it is the returns on that investment in UK Limited which are now to be used to meet the contractual terms.

        • Christopher Petrie 26th July 2017 at 7:26 pm

          No, it should be viewed as the Ponzi scheme it always has been.

          And every Ponzi scheme fails eventually.

          We need the NI payments to be physically invested and seen by each individual in order for the scheme to be sustainable.

          If a life office offered such a scheme today, the FCA would shut it down immediately.

    • Yes I was thinking exactly the same thing when I read that statement Terry.

  3. Robert Milligan 26th July 2017 at 1:25 pm

    The State Pension should have been kept at Sixty Five, Its not that we are living longer, its that more of us are so the average life is moving up. What we need to put a sunset clause on is the nanpy banpy State paying Additional benefits to those who have not bothered to save. We can afford the State Pension we can not afford to subsidise the frivolous Benefit calture

  4. Crikey Paul

    Need you ask !

    Would you endorse any Ponzi scheme as viable ?

    Have you had a rough weekend on the booze and running low on brain cells ?

  5. Stewart Kidson 26th July 2017 at 1:42 pm

    Isn’t the real question: can we REALLY afford (unfunded) public sector pensions, instead??

    • Agree entirely. Company schemes are closing fast, so will be become cash funded. The MP’s and public sector pensions need to be brought into the 21st century.

    • You beat me to it…. Remind me who is actually paying for these so called ‘gold plated’ pensions especially when they can retire at aged 60 and usually live a long time after retirement because they haven’t been worked to the bone on a building site.

      • Please don’t use that overworked and obvious description ‘gold plated’ James. It makes you sound like a daily mail reader.

        I know a midwife in her sixties that can’t afford to retire on her pension yet (she won’t reach state pension age until she is 65) who has had to cut down on delivering babies (and take on other roles to compensate) because she has a severe back problem (very common among nurses and midwives) and hip problems. She pays 6.5% of her salary into her pension, her NI contributions and tax, of course. Her pension is a part of her salary package and, although her pay is better than it used to be (not that it is that generous after a lifetimes service) she worked for years in a difficult environment, got mugged at work, abused at work, threatened at work and now, day to day problems are even worse due to staff shortages and cuts.
        If all public sector jobs and pensions are so great why are nurses and midwives leaving the profession in droves.
        Don’t believe all the right wing hype. A lot of people will be in poor health by the time they get their state pensions and I bet “Associate of the right-leaning think tank Centre for Policy Studies Michael Johnson” is doing OK.

  6. Better to ask “Can we afford Govt. DB Scheme Pensions?

  7. Trevor Harrington 26th July 2017 at 2:57 pm

    All of the above comment is correct, although I am would also like to add my usual comments about the complete lie that we are all living longer, when the average life expectancy (ONS stats) clearly say that average life expectancy has not changed since the 1970s, and my comments that our NICs have been squandered by successive Governments (particularly Blair and Brown) on their own pet vote catching policies – notably huge spending on the public sector and their outrageous employment benefits and pensions.

    I would also make the following points :-
    1 – we need people to retire in their 60s so that jobs are vacated for those coming up behind.
    2 – the local economy is being starved of the high street spending by retired people, and it will get considerably worse if we continue to push out the state retirement age.
    3 – retired people who have to carry on working, are not paying NICs on those earnings as NICs cease at retirement age, and therefore they are still not contributing.
    4 – if the Government wants to feed our money back into the economy, it is just as effective to do so buy paying state pensions as it is to build a high speed railway, which nobody much wants, let alone paying people to scrap their diesel cars for electric ones.

    I say yet again – we are the fifth largest economy in the World, and our tax revenues are more than sufficient to pay for all the things which we could reasonably desire, including state pensions for everyone, probably age a universal age of 60 …. it is just that successive Governments have spent our taxes and NICs on the wrong things.

    I would recommend –
    A – remove higher rate tax relief on pension contributions
    B – reduce the lifetime allowance to £800,000
    C – curtail the huge excesses of the Pubic Sector

    • Christopher Petrie 26th July 2017 at 7:30 pm

      People retiring earlier doesn’t give jobs to younger people, There’s an infinite number of jobs in a society.

      If your theory held true. The huge uplift in working women in the last 30 years would have put millions of men on the dole. In fact, we have record employment and very low unemployment.

      People working (and earning) creates more job opportunities for others.

  8. How can we ask if we can afford a scheme where we contribute then ultimately benefit, whilst ignoring an infinitely more generous scheme to which we contribute but will never benefit? The real cost of unfunded public sector pensions really needs to be quantified.

  9. @Trevor Harrington
    Good comments BUT
    “Reduce the LTA to £800,000”?
    IT is currently £1M and a 40 year old with a pension of say £250,000, who can reasonably expect a return of 6-8%pa over the long term, will double the amount every 10 years (Under The ‘Rule of 72’), then at age 60 this will be worth £1m, with NO CONTRIBUTIONS. That, my friend, is a tax on risk and growth and is unforgivable, in a Capitalist Society.

    • Trevor Harrington 26th July 2017 at 3:49 pm

      Afternoon Ted,

      £800,000 at an annuity rate of 5% is £40,000 per year pension, which is quite sufficient, especially bearing in mind
      1 – that a diverse portfolio will have other incomes in it
      2 – that it is per person (couples obviously double)
      3 – the state pension is in addition to these figures

      When I say that a lifetime allowance of £800,000 gives a pension which is “quite sufficient” please let me be clear …

      There is absolutely no justification whatsoever, in giving people income tax relief on contributions which provide larger pension funds than this … and certainly not higher rates of tax relief.
      If you do so, all you are doing is robbing the poor of services and state pensions, in order to pay the rich even bigger pensions than that which is reasonable, or indeed, more than sufficient.

      A capitalist society will not thrive on this sort of inequality. Capitalist societies thrive on good solid business, NOT tax reliefs on savings schemes for the already rich.

      • Evening Trevor,

        I would make a couple of points about the scenario you have outlined.

        1. People being hit by the lifetime allowance have been saving into their pensions for their entire working lives, often 40 years plus. They did not have time and forewarning to plan around a Lifetime Allowance being introduced.

        2. You are not allowing for any PCLS to be taken for any purpose other than income, an increasing proportion of the population are now having to use all or part of their PCLS to repay debts like their mortgage before they retire.

        3. You assume retirement is a line in the sand. Many will stagger retirement and draw some pension to cover an income shortfall before their state pension.

        4. I don’t see many index linked annuities offering 5%.

        5. Married couples tend not to have equal pensions. You can’t simply multiply the Lifetime Allowance by 2 to reflect a typical situation. Therefore you often need to include a spousal / partner benefit and that reduces the income on the balance of £600k even further.

        However, I agree with you that higher rate tax relief on pension contributions should be capped or that a flat rate relief scheme may be better and simpler for all concerned. I think we are both minded that there should be protections for the most vulnerable in society.

        Instead I would propose:

        1. More realistic valuation of DB schemes linked to their CETV (or a similar calculation for public schemes) at the point benefits are taken.

        2. Flat rate income tax relief for pension contributions, say 20% capped at £10,000 per annum.

        3. Many of the most vulnerable don’t understand pensions so provide an alternative gov’t scheme that can be accessed as people near retirement with a capped DB style benefit.

        4. Increase minimum funding requirement for AE and at the same time cap the interest level on any new student loans to a fair percentage above base.

        I’ve rambled enough now so will stop before this becomes unreadable.

  10. “State Pensions should not be thought as a Universal entitlement but part of society safety net. They should be paid to those in need. Narrowing the Gap the scope of state pension would enable government lower taxes”
    “Company pension schemes should be derived their tax advantage and left to fade away.
    Individuals savings should be tax exempt.

    Removing the tax incentives companies pension schemes firms would encourage firms to pay employees more cash rather than fallible prophecies of income in retirement.”

    With changes to the current system there will be no place for state minded retirement age many employers might choose to work longer. Remembering that predicted demographic crunch employers may be glad to have them

    In any event retirees to be would face with an uncertain future. It would be in their own hands not in those of governments (which may find the fiscal burden of all employees were both fickle and accident-prone when it comes to pension

    The final conclusion
    however, once policymakers are convinced that demographic difficulties lie ahead and the radical pension reform is needed they can at least start inching that way. Steps towards brutality in tax on savings on an easy to take and desire desirable in any case vigorous promotion of pension portability want to be a vote winner. So too hot to be to for regulation, pension schemes in a way that coincidentally diminish their appeal to companies to promote them. Limiting increases in state pension to rises in prices rather than to rises in earnings will gradually erode their attraction.
    With this sort consistently pursued the rich countries pension scheme system might one day end up in the right place. You never know it may

    These are not my word while I agree with the philosophy of all points highlighted above These comments are a summary of the main points of an article in the leader section in Economist June 20th-26th 1992 on a review on pensions.
    It’s a pity politicians are just waking up to the problems of an outdated pension system. In my opinion they wasted 25 years.
    Maybe the Millennials generation will do a better job of sorting out this mess

  11. Maybe they can bin the triple lock guarantee that was defended by ignorant politicians during the election. I agree with a rising pension linked to inflation but falling on the sword to include a minimum rise of 2.5% pa (especially when interest rates are a tenth of that) is moronic.

    As noble as the idea of a state pension for all is maybe it will have to be phased out for those with income over a set amount in the same way as the annual pension allowance works. Those losing out could benefit from an additional tax allowance of some sort.

    Ultimately there needs to be a better way of funding retirement for the population.

    What I do know is that there are always thoughtful ideas from the financial planning community yet the government seem to want to consult the life offices about this.

    • Trevor Harrington 26th July 2017 at 5:08 pm

      Unfortunately Aaron, what you are suggesting (some sort of means testing for state pensions) will simply create another phalanx of public sector workers who will have the task of adjudicating on a highly complex and hugely time consuming assessment on every single individual coming through to state pension age.

      Quite apart from the obvious inequalities of what you are suggesting, this would simply not be viable, and more civil servants is definitely and completely undesirable … we have far too many already.

  12. Once again the final paragraph shows Paul Lewis lacking a grasp of basic economics.
    The only way we will AFFORD a larger state pension, without adding to government borrowing, is by generating more wealth. Higher productivity, more enterprise and resulting greater prosperity is the only way to pay for higher state pensions.
    But then when your main job is working for the ‘nationalised’ BBC, you lose sight of how the economy really works, don’t you Paul Lewis?

  13. Govt. does have enough money paid in to pay everybody a state pension at age 65, with a triple lock. (Inflation is 2.6 – 2.9% so the 2.5% is not an issue), if they would stop wasting it on outside agencies, DB Scheme pensions and a poor Govt. and Local Govt purchasing ethos.
    If I earn, through my hardwork, skills and long hours, £250,000 pa then £40,000 from a pension does not cut it!

  14. There is a persistent tendency to fail to see such questions in the round. The economy involves a circular movement of money to keep it going. In the out box is the cost of state pensions in the inbox it the amount of spent collected in tax – VAT, excise duty etc and income tax when total pensioner income is above the threshold. One of the problems is the excessive amount paid in tax relief to higher and additional rate tax payers. High earners do not need to be unduly incentivised to save for the future. Making pension tax relief flat rate and cutting over generous allowances for tax shelters is one way to find more money. As is making a beginning to save some NIC income by starting a pension sovereign fund.

    When the UK pays the lowest state pensions in the G20, apart from Mexico only the extreme right ask the question in the headline because they fear for their tax welfare benefits and tax shelters. Watch this video that exposes where the real benefits end up
    https://youtu.be/EynaoC3vgp8

    Suggest you also read Roz Altman’s recent article in this publication on how some auto enrolment schemes fail to provide pension tax relief to low earners

    The other thing is many do not understand the effect of percentages. For every £10 the tax relief is £2 for a standard rate tax payer. Because the relief is based on the total, including the tax relief, the return on your net pension investment is 25%. Now here is you homework for tonight – work out what the tax relief return is at the 40% or 45% tax rate.

    • It’s a respectable position to be in favour of increasing taxes through reducing tax relief, but don’t pretend it’s anything other than an increase in tax for those losing marginal rate relief, and a decrease in tax for those taking advantage of a marginal + rate of tax relief (e.g. flat rate 30% relief for basic rate taxpayers).

      I’ve heard many people who would be strongly against increasing taxes opine that removing marginal rate relief is a good thing …

      • Tax relief is to incentivise saving for a pension. A flat rate at the basic rate was what I was advocating. Yes higher and additional rate tax payers would lose some of their current advantage. They would be unable to claim beyond the basic rate but have an income that does not require pension saving incentives. Because they can put more into their pension than low earners, they would still benefit disproportionally. As I show the actual return on 20% relief is equivalent to a 25% return on the net amount the saver puts in. Although suggestions of 30% or 33% flat rate relief are commonly argued for, this is unnecessary. The answer to my question on net contribution means that higher rate tax payers gain 66.67% on their net contribution and higher rate tax payers 81.82% – once the tax man pays back all the tax relief. Much simpler to insist all schemes provide for the automatic 20% tax relief calculated on the total including the relief.

        • Yes, your proposal is well understood – flat rate incentive for private pension saving. It is though a tax increase for higher earners, and no-one should pretend otherwise. As I say, it’s a respectable position to be in favour of that, but just see it for what it is.

  15. What would help is if charges were reduced on Personal Pensions as this could go a long way to improving Pension outcomes and not having to rely on the state pension . I have launched a business to address this http://www.lowermycharges.com

  16. An average wage earner in the UK (£27,000p.a.) – total ee/er NI conts = £580 per month, far more than the suggested £300 per month calculated in this article as being required to provide an equivalent to State Pension. Don’t use transparent, lazy calculations to back up the con.

  17. Trish Alderson 28th July 2017 at 9:26 am

    I object to the State Pension that I have paid 46 years National Insurance for and my employers also paid towards my NI. As a HOLIDAY for 24 years. The wording here is INSURANCE not benefit you pay for insurance you do not pay towards benefits. My pension age has been increased my 6 years with no notification from the DWP none what so ever. If people and the government want to call my State Pension as a 24 year holiday benefit payment. Then I ask that my NI payments are paid back to me because I was given incorrect information at 16 when I started paying. Also most women when they reach pension age if they ever do won’t be on holiday they probably will look after parents who are ill, look after grandchildren because their parents have to work to get by. SO my State Pension is my right I have paid my employers have paid. I would like to add that because my State Pension age is now 66 I have had 42.500 pounds stolen from me. Either pay me all my contributions that I paid in good faith and I had no choice as it was taken out of my salary BEFORE I received it. This is not a big ask ONE – Give me my pension now. TWO – Pay me all my NI contributions now.

    • You have been lied to by the state and the political parties over the years.

      Unfortunately unlike when politicians see unfairness delivered by other bodies, typically in the private sector there is little outcry. The secret of the National Insurance Fund is, as was stated at its commencement, there is no fund. It is an intergenerational game of pass the parcel with each new phalanx of retirees and politicians of the day hoping to pass on the day the parcel explodes down the years (and occasionally wrapping more sellotape around it by pushing back retirement dates).

      The original age for the State pension when it was created in 1908 was 70 (for the obvious reason few people then lived to this age). In addition it was means tested by income. It was reduced to age 60 and 65 just after WW2. Our problem is currently we spend more than we earn as a country and have been doing so for many years. This change is being made to save future payments and although unfair by the nature and method of it’s introduction it is sensible from the point of view of future generations (probably best not to consider the additional liabilities stored up in public sector pensions at this point). Similarly if we consider higher earners who will now not get the benefit of SERPs as their state pension will be a single tier pension, is this not also unfair as no one said on starting work this would happen in the future.

      The contributions were unfortunately never considered by the state to be “yours” nor were they ring fenced or placed to once side. They have been spent, some on those who are already retired or ill or who have now passed on and some on political follies. You can’t have it back whether it is fair or not.

  18. Nobody has so far has mentioned the Frozen pensioners which affects over 500,000 pensioners worldwide.
    These are pensioners who are now living abroad but are denied any indexation.
    There is no logical, financial or legal reason for this to be maintained.
    The freezing is based on the location of the pensioner which has no bearing or relationship to the state pension.
    For over 11 years there was no publication of this fraudulent policy.
    Decades ago many people were encouraged to emigrate to Australia but now have no pension increases ever even though like every other pensioner, they qualify by virtue of their contributions to the National Insurance Fund which by the way IS ringfenced !
    There is a fund which some doubt which is in surplus at this time and it can be borrowed by government through the DMO which has been the downfall of the system over the years.
    I wanted to put this aspect of the state pension on record as it had not been mentioned and appreciate the many comments made and views given which hopefully the politicians will read and consider when making future policy changes.
    The bottom line is that it is affordable but unnecessary expenditure should be cut back like the Overseas Aid which is about 20 times greater than the cost of paying the Frozen pensioners their rightful entitlement which would cost just 580 million but would stop the current discrimination imposed by section 20 of the Pension Act as no reciprocal agreements are necessary to pay the state pension anywhere in the world !

    • The National Insurance Fund Investment Account is not a ringfenced fund. Yes it has a balance, the purpose of which is to iron out the differences in the needs over the years that the fund may pay out for (i.e. in recessions it may mean higher unemployment pay). Currently it contains £24billion. However it is then “loaned” to the government and earns around the base rate in return.

      However, at the end of the day this is simply part of the UK government’s overall funds (and £24 billion is only around 3 months contributions of NI) due to this it is not a “Fund” as such but the equivalent of a current account which may grow or run down depending upon what happens. Due to this there isn’t actually a “fund” just some hypothetical accounting entries based upon “best guess” predictions which may be right or wrong. In fact the best way to think of it would be if you had a huge credit card bill but placed some of your funds in a savings account marked “retirement and illness or unemployment”.

      This account might make you feel personally happier but in reality you still owe a lot.

      On the overseas aid budget I agree in general this is not sensible as we are currently borrowing money over the longer term to use this for a donation to the “poor” of the world some of whom have space programmes.

  19. Very lively, long and interesting debate this has sparked. Here’s a thought… why shouldn’t pensioners pay NICs? After all, they’re the ones drawing the pensions and likely to need the NHS more than most. If their pensions are low they will be below the tax and NIC threshold anyway. Here’s another thought, why not graduate out completely the State Pension for those with private pensions or other unearned income of, for example, £100k per annum? Arguably they don’t need a State Pension anyway but are still receiving one. I suspect these two measures alone would go some way to helping plug the black hole?

  20. I posted this on the Steve Bee article.

    I think a delve into the history of pensions might be of use.
    When pensions were first introduced at the start of the C20, SRA was 70 and the meagre pension was means tested. Longevity for a male was about 51. So not much strain on the exchequer!
    BY 1925 SRA was 65 and male life expectancy was about 64. HMRC still quids in!
    In 1960 Male life expectancy had risen to about 70 – so 5 years pension in payment.
    BY 2012/14 life expectancy had risen to 79 – 14 years in payment. This leads me to postulate that the retirement age (for non heavy manual work) should actually be at least 70.
    The main problem with the State Pension in my view is the expectation of it being paid far too early.
    If you really want to consider other changes then how about:
    State Pension means tested. it would mean that they could reduce tax as it would only be the least well off that would attract a State Pension. Also a cruel but true fact – the poorer you are the sooner you die (in general). So the savings multiply. The tax need not necessarily be reduced at contribution stage – although tax relief at contribution should be available at the highest marginal rate and there should be no limits (except perhaps withdrawal of the PCLS). Then private pensions in payment could be subject to a reduced flat tax (irrespective of other earnings) of say 10%.
    I guess this may satisfy all parties.

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