“The financial bond between generations is at threat of eroding. Figures from the Office for National Statistics show that there is drastic divergence in disposable income for retired and non-retired households. With retired households have significantly more money than in previous years. Between 2006 and 2018 household income for non-retired rose by 36% and retired rose by 60% while costs rose by 31% for non-retired and 38% for retired.
“On top of this the latest report from the House of Lords Select Committee shows that we are reaching a stage where generations may be benefitting more from social policy than they are contributing to it in their lifetime. The number of retired people is only going to grow as people live longer, drawing the state pension for longer and increasingly tap into the NHS for medical treatment and local authorities for social care. That combined with a fundamental change in family structures means that a fundamental re-think is required, and it does not appear that tweaking the current system by increasing the rates of existing taxes, is going to adequately address this issue. Clearly the whole system needs a rethink.
“The report flags important pension related policies that need to be addressed and while the report doesn’t have all the answers these issues are clearly ones that need to continue to be examined.
- Older workers need to continue to fund National Insurance Contributions – As we live for longer, we work for longer and so it makes logical sense that we pay more into the system. However, it does raise the question of fairness and what NICs for? Clearly they do not pay for the State Pension, although the right to the State Pension it is secured through their payment. The purpose of NIC is considered by the House of Lords who point out there are strong arguments for the government to consider greater alignment of NICs and income tax systems. This has been in the background of the political agenda for some time and a concrete look at the two systems will need to be considered.
- There should be an assumption of the employment status of ‘worker’ by default, in order to make the rights and protections that come with this status enforceable – Bogus self-employment is a huge issue, made worse by the murky water between who is self-employed and who is a worker. The short-term benefits of this proposal are understandable, they will ensure that people are automatically given rights such as pension contributions, certain protections, statutory sick pay etc. However, it is not a long term solution. What we need is clear boundaries and definitions of those two groups. One that ensures that people get the rights they deserve but British business does not fall apart. No easy task, but one that cannot be ignored.
- Remove the Triple Lock – The removal of the Triple Lock is again not a new proposal, it is one that no political party has felt strong enough to tackle for some time. However, ignoring it is kicking the can down the road and the House of Lords proposed replacement (as proposed by the Work and Pensions Select Committee) is sensible and ensures the system continues to function, but isn’t as generous. It needs to be taken seriously and weak political parties are ignoring the long-term impacts.
- Reconsider age-related benefits – Other age related social security payments have been criticized because they do not appear to be well targeted to achieve their purpose. Generally, those that cannot afford certain things (TV license, bus pass, fuel payments) should be subsidized directly by the Government rather than qualify just by age.
- Plan needed for Mid-life MOT – A toxic combination of socio-economic factors, including longer lives, more freedom in pensions and reducing state benefits, mean people now more than ever need to be engaged with their later life savings. A mid-life MOT is not a new proposal and unfortunately the House of Lords paper doesn’t bring some of the challenges of the policy any further forward beyond pointing out that it needs more thought.”