Radical overhaul of pensions proposed: Basic minimum 'should be a right for all'

Click to follow
A RADICAL overhaul of pensions that would include replacing the government earnings-related pension with a scheme invested in a new form of gilt, has been proposed by the Institute for Public Policy Research, the left-wing think tank.

Better Pensions for All by Bryn Davies, an actuary, says that all pensioners should be entitled to a minimum basic pension as a right, paid for by the current working population. But this 'solidarity between generations' need not exclude encouraging people to save for their old age, he says.

Mr Davies rejects the idea of a move to reserving current National Insurance contributions for future pension payments. 'Any move to fund the basic pension is equivalent to taking money from pensioners of today with the intention of providing ourselves with better pensions in the future,' he said.

He proposes that the pension be increased so that it is greater than the income support level. This could be paid for by the abolition of the income tax age allowance, topped up by the Treasury.

He dismisses the idea that people should be allowed to contract out of the basic state pension in the same way that they can contract out of the state earnings-related pension (Serps). This would cost an average of pounds 1,000 per head, or pounds 1bn for every million employees who opted out.

Serps could be relaunched on the savings model as the National Personal Pension Scheme so that members appreciated its true value. They could be sent an annual statement and would be allowed to make extra top-up contributions.

Nominal and actual contributions would be held in a new class of government bonds.

Better Pensions for All by Bryn Davies, pounds 7.50 (inc p&p) from IPPR 30-32, Southampton Street, London WC2E 7RA.