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How to make the state pension fairer: the super-rich shouldn’t get it
This summer has seen a half-hearted debate about what to do about triple blocking.
For those unfamiliar, the triple lock means that the value of the state pension must increase each year in line with the highest of the three figures: inflation of goods and services; wage inflation; or 2.5%.
Brought under the coalition government to appease older voters, for years critics have warned that this policy was prone to failure. Well here we are. Due to the rebound in wages after the shutdown, the triple lock dictates that the state pension should increase by a colossal 8.8%.
This week, the government appears to have reached the conclusion that many predicted. They’re going to manipulate it, giving up the triple lock for a year before coming back the following year.
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Most seem satisfied with this. TO YouGov survey suggested that all age groups support triple block. This seems surprising, doesn’t it? Let’s take a look. They asked:
“Would you support keeping this rule in place, or removing the rule and having the government decide each year how much it wants to change the state pension for?”
This is a false dichotomy. The government is not the only possible source of an alternative figure, and since public trust in government is negligible, it is not surprising that respondents chose to limit their power.
It would be a waste if the debate ended here. This summer we have been faced directly with terrible politics and have decided that we cannot think of anything better.
But there are alternatives. A means-tested state pension would be more equitable, more empowering, and more profitable.
Let’s start with a question: Should the Lord [Alan] Does Sugar receive a state pension of £ 10,000 a year?
I hope that the majority answer no. He has said it himself, he is a billionaire, he does not want or need Free benefits for retirees.
Now there aren’t many Alan Sugars, but it sets an interesting precedent. There are people who have such a large volume of wealth that it is ridiculous that they receive money from the State.
How rich are we talking? £ 100 million, £ 10 million, maybe less? This is up for debate, but with an aging population and skyrocketing covid debt, we should adopt equitable policies that save the state money.
However, this may have angered some of you. “It’s not fair,” yell the rich boomers, “I paid.” But this “philosophy”, created by the insidious national insurance tax, is not borne out by current policy. You are awarded a pension even if you never “paid” through state pension credits that provide £ 177.10 per week, only £ 2.50 less than the full state pension.
For commenters advocating triple blocking, this is exactly the problem; The UK state pension is too low. The United Kingdom has the lowest state pension of the 36 countries in the OECD.
But this is misleading. Britain’s retirees make use of non-state pensions far more than their overseas counterparts, through a combination of private pensions, workplace pensions and enviable final salary plans.
There is a group of pensioners who basically get a “double bubble”, while the less well off get by with an inadequate state pension, which is kept low because it is universal and therefore expensive. A means-tested solution would help in some way to solve this inequality in pensions.
Despite this, many will still be offended if their state pension is lowered. Whether it’s fair or not, some will complain that they’ve planned a certain income, and taking it off puts them out. That’s why the policy needs to be rolled out gradually over a period of at least 10 years and clearly communicated to avoid another ‘Back to 60’ fiasco.
Settling for a modified triple lock shows a lack of imagination across the spectrum of the British political class. I believe that a means-tested state pension is the best way forward, but there are hundreds of alternatives. The state pension could be made optional for the better-off, or wealthier pensioners could be encouraged to donate their state pension to the NHS or to charities.
Let’s listen to these ideas. We must begin to imagine a policy that creates a better tomorrow.