The Future of the State Pension

What should happen to the basic state pension? Governments keep ducking this – but crunch time is coming.

Britain’s state pension is low compared to similar countries: too many pensioners are in hardship. Yet Gordon Brown’s solution - means-tested benefits and “tax credits” - has created a complex, costly system. It undermines the incentive to save and still results in poorer pensioners missing out.

Add in two extra facts – life expectancy between 83 and 85, and rising, and the “baby boom” generation now retiring – and pensions policy is challenging.

Yet we must face this, and soon – even if it means unpopular decisions.

For those of us under 40, I believe we have to accept we can’t all retire at 65. That’s why Liberal Democrats now argue that when my generation starts retiring, in 25+ years’ time, we must wait till 67 before collecting our state pension.

However, the money saved produces real advantages.

It means we could afford a universal state pension of around £110 a week, linked to earnings: this “Citizens’ Pension” means we can scrap all means-tested benefits, credits and bureaucratic forms. Women especially benefit hugely from our idea.

This Lib Dem policy would restore the incentive to save, boosting private saving.

Sensible? Well, it’s similar to ideas in the Government’s own Pensions Commission and New Zealand.

It’s just a shame Gordon Brown rejects it. Why? Because it ends the complex system he’s created.