Steve Webb’s latest Money Mail response is both authoritative and interesting, if you can’t be bothered to read this blog, read Steve’s article instead (but both are worth a read).
Will the state pension become means tested in the future for people who own property or have private pensions? @stevewebb1 replieshttps://t.co/LnPEfATESJ
— This is Money (@thisismoney) April 8, 2024
Those who want means testing of a state pension can point to Britain before 1948 and Australia to this day. They may include one Government Actuary who in 2014 wrote in a quinquennial review of the NI fund
Which has been taken as code for saying that those with private pensions don’t need a state pension too (the situation in Australia). Steve Webb is right to point out that means testing undermines auto-enrolment almost as much as it does the state pension. Frank Field argued that means-testing was socially divisive and demeaning to the poor. We have means tested pension credits and they remain one of the least loved and understood parts of the benefit system.
But Webb’s most powerful argument is that the state pension is subject to income tax and so is already subject to up to a 45% haircut. If Government wants to extend the grab-back, it can start introducing national insurance on pensions , at least to the rate that is hypothecated to the NHS. Security of care is second only to security of income in the hierarchy of needs elderly people have of the welfare state.
But why are we arguing for greater taxation of the elderly? It is because of the growing discontent with younger people with baby-boomers , who are assuming to be tucking into the feast having pulled up the drawbridge on everyone else
You can read extended threads from Nic Millar, Steve Groves and other twitterati on the unfairness being heaped upon them. My blog on solidarity between generations has gone down like a lead balloon.
Whatever became of inter-generational solidarity? https://t.co/8yqjSPUHTW We cannot allow our heads to drop in the face of these challenges, we must face them with determination and consider the task a challenge not a crisis. Most of all, we must be bold in our ambition,
— Henry Tapper (@henryhtapper) April 9, 2024
I do not see any more purpose in beggaring the state pensioner, than I did in beggaring the workplace saver. The last time the affordability of pensions was so questioned, it led to end of accrual of DB benefits in the private sector. That is not ending well. I don’t think calls to scrap the triple lock and means test what’s left have any more merit than closing pension schemes.
There is no simple way to sort out pensions by messing with pensions. The way to sort out pensions is to generate more money to pay them. We haven’t been generating the money} recycled into the economy. We need to turn that around as well.
I have a lot of sympathy with the argument that state pension affordability should be linked to productivity (as measured by GDP).
Link pensions to productivity then, let pensioners share the risks with younger people not take an increasing share of the pie if the productivity gains don’t come through. They’d worry more about the incentives for younger generations then 😂
— Steve Groves (@Sjg3G) April 9, 2024
This is how unfunded public sector occupational measures are measured (the Scarp rate) and I’d be happy to risk share my state pension based on a consensus. Solidarity between generations works both ways. Better to risk-share than means-test.
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Update on the COD (last week’s debate on the impact of contracting out)
In last week’s response I implied that Steve was being both evasive and a little disingenuous about the application of contracted out deductions from state pensions (known as COD or COPE). I think the DWP may have switched acronyms to avoid jokes about things being a little fishy, but the smell lingers. The application of the COD does appear to be favouring those who contracted out (in whatever hue) against those who stayed “in” SERPS. Why does this matter, well it’s tough on John Greenwood and those who stuck SERPS out and it is nice for me as I get a lot of free pot and pension without much loss to my state pension.
I’d hoped by now to have more information about how much of my COD is from voluntary contracting out through a personal pension and how much through a company pension I was in. Finding out about this has been a journey for me, I’m still to get to the destination but for now, thanks to Sir Steve and David Robbins and Andrew Young for assuring me that there is a working system behind the COD.