An influential right-wing thinktank, co-founded by Margaret Thatcher in 1974, has proposed that the State Pension be put into “run-off” and replaced with a Workplace ISA, whilst also means-testing other pensioner benefits.
Under the thinktanks’s proposals, no further ‘entitlements’ to State Pension would be accepted from 2020. Past ‘entitlements’ would continue to be honoured, as the “legacy State Pension”, but others would be expected to pay in to a Workplace ISA, with no access permitted until a person reaches 65 years of age.
All non-pensioners would be eligible for SCP in 2020, meaning the first payments would be made in 2034,.. and would be complemented by the Workplace ISA. But SCP would only become payable once a person reaches the age of 80, meaning the pension age would also be increased.
The Workplace ISA would be “pre-funded by the State via a 50% bonus”, up to a “modest annual cap”, and include employer contributions made under automatic enrolment. However, no access would be permitted until a person reaches 65 years of age.
Michael Johnson, a research fellow at CPS, who was also responsible for the running of David Cameron’s Economic Competitiveness Policy Group, said: “In 2014 the then Chancellor announced “Freedom and Choice” which, by ending the requirement to annuitise, gives individuals greater flexibility when accessing their pension savings, i.e. more control. The public response has been very positive.
“Subsequently, the Lifetime ISA was announced, potentially indicating a change in direction for how long-term savings are taxed. Meanwhile, company DB schemes are withering on the vine, and automatic enrolment into DC schemes has become an integral part of the retirement savings landscape.
“The proposals in this report, to replace the State Pension, take into account the broader pensions and savings environment.
“They are consistent with the direction of travel initiated in 2014: their purpose is to complete the journey, set against a pervading ethos of personal responsibility (self-reliance).
“They explicitly embrace the message that work pays, while providing a robust safety net for those who need it.
“The report considers the hint within John Cridland’s recent interim report that he may recommend a more personalised approach to State Pension age (SPA).
“This is to be discouraged: there is a real danger that introducing different SPAs for different people could lead us down a slippery slope into immense complexity.
“It would be expensive to administer and could be highly contentious (potentially litigious). Consequently, the State Pension is no longer fit for purpose.”