At a Money Marketing pension round table last week, Legal & General wealth policy director Adrian Boulding said the basic state pension, state second pension and pension credit system are fooling people into believing that state provision will be enough.
He said: “The Government should be bold and go for a citizen’s pension. They should sweep away this mess we have of a basic state pension that you have to earn over so many years and a state second pension that is fiendishly complicated and then a means-tested pension top-up.
“If everybody knew they were going to get the same £120 or whatever, I think everything else we are trying to do would fly. The National Employment Saving Trust would fly and auto-enrolment would fly because people would see that the basic pension is not enough and they would be clamouring for more.
“It would get us away from this confusion that the state will see them all right.”
Hargreaves Lansdown head of pensions research Tom McPhail said the change needs to be made in the new Government’s first term. He said: “The state pension is the foundation of the pension system and the reason we have so many problems today is because they have not fixed the foundations.
“Anything the Government does which is not focused on simplifying the state pension is not addressing the problem. They have to start there.
“If we get a workable Tory majority, the imperative is to be bold and go for that in the first term. It might take a while but they need to at least put in place a process that will get us there quickly so that everybody can see from there on in that whatever you save is yours.”
He said the Government should tally up everything it spends on pensions, including the billions on the state pension, public sector pensions and tax relief for private sector pensions, and redistribute it.
McPhail said: “Put that on the table and work out how you are going to redistribute it because clearly there is an opportunity to do that now. If people could see that within, say, 10 or 15 years that is where we are going to end up you have a solved problem.”