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Put state pension into ‘run-off’ says think tank

Johnson

No further entitlements to a state pension should be given after 2020 to reduce the cost to the government, a think tank has argued.

In a paper today, The Centre for Policy Studies’ Michael Johnson argues that while past entitlements should be honoured, the state pension is “facing fiscal calamity” without reform.

Total spending on the state pension has risen by a quarter since 2010/11.

Johnson argues that after 2020, a residency-based Senior Citizens’ Pension should be brought in, providing a larger income, say £200 a week, from age 80.

Johnson proposes complimenting this with a Workplace Isa, funded with a 50% state bonus and subject to a cap, to accommodate auto-enrolment contributions from employers.

The assets would be inaccessible until age 65, encouraging people to either annuitise or go into drawdown before reaching their Senior Citizens’ Pension age.

AJ Bell senior analyst Tom Selby says that Johnson’s solutions are likely to prove controversial.

He says: “Government has already faced protests over relatively modest increases to the state pension age – there would be riots in the streets if they hiked it to age 80 overnight.

“We do, however, support the idea of establishing an independent commission to review the pensions tax system and bring a period of stability for savers. Rather than tearing up the foundations of the UK retirement market, the Government should task this commission with evaluating the system we have now and recommending what, if any, reforms are necessary.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Idiotic proposal by another person whose salary is no-doubt funded by OPM!

    We all pay NI towards the ‘expectation’ of a state pension at a reasonable age (in our mid to late 60’s); if there is not enough money available and the system is underfunded, then bury the final salary scheme for LGO and use the savings to help repair the shortfall for a start.

    It’s always easier to destroy the outcome than the cause, but this is the sort of nonsense we have come to expect from people whose salary/retirement package insulates them from reality.

  2. Money Guidance CIC 3rd November 2016 at 11:40 am

    I don`t think he is salaried for this work.

  3. And then they wonder why individuals are tempted to explore aggressive tax avoidance measures?

  4. Make those that smoke and/or over-eat pay for their NHS treatment rather than using taxpayers’ money to keep these people alive longer, only then for them to drain the nation through drawing as state pension to buy more booze & fags in their 70’s & 80’s.

    Over-population will sink the western world and then the human race.

    Once upon a time we had regular wars and disease that would ‘regulate’ the population…..unfortunately so-called ‘progress’ has eradicated many of these and resulted in a burgeoning population that is unsustainable on a planet of only finite size. Fact.

  5. Couldn’t agree more, given that today’s tax payers pay for today’s pensioners, its always was and going to be, a ponzi scheme doomed to failure.

    You either cut the ties now or resign to carrying or dragging this albatross around till the bell tolls and doomsday beckons !

  6. Let’s face it, the unsustainability of the current state pension isn’t going to go away, so something drastic needs to be done.

    If the idea were for people entering the workplace from 2020 not receiving State Pension accrual I would warm to it as this would allow a cultural shift in thinking towards the State Pension over a period of many decades. At least then you would know throughout your whole career that your quality of life in retirement is solely in your own hands. But everyone ceasing future State Pension accrual from 2020? I don’t think so.

    Also, this idea isn’t just about the State Pension, but tax relief on pension contributions as well, as the way to fund this idea is cited as follows: “The Senior Citizens’ Pension, the Workplace ISA bonus and Income Support could be funded by ending all Income Tax and NICs reliefs on pension contributions, assisted, over time, by a diminishing cost of what would then be the legacy State Pension.”

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