Scrap state pension for rich people, says OECD

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28 Apr, 2017

Scrap state pension for rich people, says OECD

Britain should stop giving the state pension to the rich and spend the money on benefits for the poor instead, according to the Organisation for Economic Co-operation and Development.

The Paris-based thinktank said that ending payments to the wealthiest 5% to 10% of pensioners would mean the government could give to those in greater need of support.

Under the current system, anyone who has paid national insurance contributions for 30 years is eligible for the state pension, irrespective of wealth.

In comments reported by the Financial Times, Mark Pearson, Deputy Director of Employment, Labour and Social Affairs with the OECD, said that similarly to other countries, the UK faced the growing costs of an ageing population, with more pensioners and fewer people of working age.

“Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?”

“Or another way to ensure an adequate pension is to think about whether the pension should only be paid to those who really need it, to ease the tyranny of the maths. Giving less [pension] to the people at the top would free up resources to increase general benefits”.

Pearson said the UK’s pension system was among the least generous of the OECD’s 35 member countries. The basic state pension amounts to £6,360 a year, and the full new state pension introduced last year is worth £8,297 a year.

“The UK pension is pretty low,” he said.

The state pension has garnered a lot of attention in the early stages of the general election campaign, with a refusal from PM Theresa May on Wednesday to rule out that a re-elected Conservative government would scrap the so-called “triple lock”.

Under the existing system, the basic state pension increases each year by the same as average earnings, the inflation rate or 2.5% – whichever is the highest.

Head of policy at Hargreaves Lansdown, Tom McPhail, rejected the OECD’s idea of removing the state pension from the richest members of society.

He said, “It sounds like a pretty bad idea. If you want to take money away from the rich, the tax system is usually a better place to go”.

“It has the potential to be quite socially divisive and one of the essential and valuable elements of the state pension is the reasonably clear and simple entitlement structure – if you pay your national insurance, you will qualify for it”.

McPhail added it would be politically unwise to start undermining the principles of the universal state pension, and could potentially aggravate intergenerational tensions.

Today's earlier news - UK economic growth slows to 0.3%