Coalition's pension shake-up is a major error

Prof Philip Booth writes for City AM

The proposals for a new state pension are straight from the old Lib Dem handbook. The government wants to raise the state pension and pay it to everybody regardless of National Insurance contribution (NIC) records.

There are problems with the current system, but sustainable reform is possible. The contributory principle should be strengthened and the two state pensions merged into one. Individuals should earn an entitlement to a fixed amount of pension each year when they pay their NICs with that fixed amount being indexed until retirement. Once pension is accrued it should neither be added to nor taken away by the government. The pensions of all the elderly would then be determined by the entitlements they earned throughout their working lives. If a particular generation wanted higher pensions, then that generation would pay for it with higher NICs.

Read the full article on the City AM website .

 

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