Think tank calls for political and moral leadership to spark an honest debate on pensions
Reform Scotland, the independent, non-party think tank, has called for politicians of all parties, at Holyrood and Westminster to end the “conspiracy of silence” on the future of the state pension.
Ahead of next week’s Budget, the think tank has published The Pension Solution, a paper which outlines that:
- across the UK there will be an increase of almost one-third in the number of pensioners, but an increase of less than one-tenth in the number of working age people (over the next 25 years)
- in Scotland, the number of pensioners aged over 75 will increase by almost 80% in the same timescale
As a result, the paper concludes that the affordability of the state pension, in its present form, is unsustainable, and the system requires a fundamental rethink to meet those demographic realities.
In response to this public policy challenge, Reform Scotland has suggested that National Insurance be phased out and replaced by a compulsory system where individuals pay a percentage of their salaries into a defined contribution scheme. Under the think tank’s proposal, which it has called The Pensions Guarantee:
- Individuals would own their own pension pot, which they do not do at present
- People would know and understand exactly how much money they had for retirement
- Each person could choose when they wished to draw their pension, rather than being dictated to
- Each person’s pot could be passed to their family upon death, rather than being ‘lost’ as it is just now
- Future generations would no longer have the burden of funding current pensioners
Commenting, Reform Scotland’s Chairman Alan McFarlane said:
“Politicians of all parties have been engaged in a conspiracy of silence about the state pension for too many years. The idea that we are all ‘paying in’ to our pension is a myth, and we need the political and moral leadership required to debunk that myth.
“The reality is that National Insurance is nothing more than income tax with a nicer name. Current taxpayers pay for current pensioners, and have done so since the invention of the state pension. It is simple logic that as the number of pensioners increases at the same time as the number of taxpayers decreases, something has to give.
“Reform Scotland’s Pensions Guarantee is fairer for pensioners, because it gives them certainty over if, when and what pension they will have. And it is fairer for taxpayers, because they are able to contribute towards their own retirement rather than paying for the retirement of others.
“Most importantly of all, it provides a solution to the problem of fewer taxpayers paying for more pensioners. It’s time for the politicians of today to engage in this generational debate rather than handing the ticking timebomb to their successors”
NOTES TO EDITORS
- Reform Scotland is an independent, non-party think tank that aims to set out a better way to deliver increased economic prosperity and more effective public services based on the traditional Scottish principles of limited government, diversity and personal responsibility. Further information is available at www.reformscotland.com.
- The Pension Solution can be read here.
- The Pension Guarantee (full paper, released previously) can be read here.
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