Britain was among the first to introduce a state-funded pension scheme and tax incentives that fostered a strong pensions industry. But today the picture is not so rosy. It is time to reform our system of pension provision to ensure that future pensioners can look forward to security at the end of their working lives.
Due to an ageing population and an upsurge in early retirement packages (mostly public sector) the cost of pensions has spiralled out of control. The government also introduced incentives to get people into private schemes. Unfortunately, this was not properly regulated and many pension funds were oversold using high levels of inflation to generate unrealistic expectations.
Pension funds have been further impoverished by over £5bn each year since 1997 when Gordon Brown abolished tax credits on dividends collected by pension funds. A weak stock market added to the difficulties and many occupational final salary schemes were closed to new members as their commitments outstripped their resources.
Lifetime Accounts and Pensions
The introduction of Lifetime Accounts would have an immediate effect on pension funding. Individuals would have ownership of their pension through their Lifetime Account.
Individuals would be able to add tax-free amounts, or transfer existing pension policies into Lifetime Accounts. As well as regular easy to understand statements you would also be able view your account online. This would allow you to watch your pension fund grow year on year, secure in the knowledge that it was backed by the state but safe from politicians.
- “Privatise the state pension system, like Chile did in 1981 - an example that many countries round the world have now copied. Scrap the fraudulent pay-as-you-go system, give people their tax contributions back and make them pay into personal savings accounts instead. Much harder for politicians to defraud.” Dr Eamonn Butler, Director of the Adam Smith Institute
For those near retirement age, we would provide more flexible ways to augment the state pension. Lifetime Share Accounts would be topped up and it will be possible to transfer private pension schemes into Lifetime Accounts.
The New Party would introduce a flexible retirement age with tax rebates for older people who choose to keep working. We would treat early retirement income as normal income for tax purposes.
Existing state pensions and benefits
Existing pensioners, unable to build up pension funds through Lifetime Share Accounts, would have the value of their pensions maintained. The New Party would also replace the present system of supplementary benefits with a simple self certification scheme to provide assistance for those requiring help with winter fuel bills and transport. We would also redress the imbalance and injustice of over-generous public sector pensions and early retirement packages, already delivered, by making them subject to review.