Written by Leah Milner & Helen Pow
The Adam Smith Institute says the state pension is a “giant Ponzi scheme" that will soon become bankrupt and must be phased out.
Writing for the thinktank’s blog, Tom Papworth calls for the state pension to be phased out by age, so those starting their working life now have plenty of time to make their own pension provisions but those who have less time left until retirement are not unfairly penalised.
He says: “We need to wean people off the state pension. It is a giant Ponzi scheme that sooner or later will become bankrupt. There used to be five working-age people supporting each pension, now there are two and in the future that number will shrink. It cannot go on."
Under Papworth’s proposals, people over 60 would get a full pension, those under 20 would get no state pension and those in between would see their state benefits tapered away at a rate that equals 2.5 per cent a year off retirement. He also calls for the mandatory retirement age to be scrapped.
But Legal & General wealth policy director Adrian Boulding says: “The basic state pension is so important. It is the principle of intergenerational solidarity where you pay tax so your parents have a pension and your kids do the same. I am all for saving more on top of that but that basic foundation level is essential. If there were no mandatory retirement age and if people carried on working, employers would have to discipline those employees out.
“It would be pretty brutal and would mean people will just fall into unemployment benefit so we may as well just continue to pay pension benefits."
Published in MoneyMarketing here.