What should the government do?

MoneySaverLog

I say none of the above

dtsazza

The only thing that would make the State Pension completely sustainable, in my view, is for it to move from a Defined Benefit to a Defined Contribution basis. That's the only way to be sure that the pension is "fully funded", because the money is paid up-front, and is by definition enough to pay out whatever the future liabilities are.

With the best will in the world, it's not possible to run a DB scheme and be able to say with a straight face that the scheme is definitely able to meet its future commitments. And I would rather the government did not take that sort of unwarranted risk with the public finances.

hyubh

dtsazza wrote: »

The only thing that would make the State Pension completely sustainable, in my view, is for it to move from a Defined Benefit to a Defined Contribution basis. That's the only way to be sure that the pension is "fully funded", because the money is paid up-front, and is by definition enough to pay out whatever the future liabilities are.

Er, if the state were so weak that it couldn't raise the taxes to pay some kind of 'DB' state pension as you put it, then it wouldn't be a 'state' and no DC pension would be secure either. That said, by all means prove me wrong by pointing to an actually-existing anarcho-capitalist utopia...

jamesd

This government already introduced a plan to change the state pension to partly funded.

The flat rate pension is a cut to the pensions for employees who work a lot of years, because additional state pension currently accrue for a whole working life but stops at 35 years under the proposed system. That cuts the expected pension from around 190 a week to the flat rate 144 a week for a low earner employee working under the new system. The auto-enrolment system may cause people to pay enough to top their income back up to closer to that 190 value.

This is one of the inter-generational transfers of money from the young to the old that's happening at the moment. In this case the young will pay for the pensions of the older generation while also having to replace part of the funding of their own pensions.

N1AK

Increasing the state pension age (or decreasing the amount you get if you claim it earlier) is probably the best solution. If people want a long comfortable retirement I don't see it as the states responsibility to provide it for them.

My issue with that solution is that everyone is responsible for the ever increasing pension burden on the state but it is only the younger generations who are being penalised to fix it. Someone who is currently 66 and retired is as responsible for the pension timebomb as someone who is 55 who won't get a pension until later and as someone who is 45 who will have to work longer still.

Arguably the only people who aren't responsible for the fact we have a dysfunctional state pension process (a glorified pyramid scheme) are the youngest generations who haven't elected the governments who put it in place. Guess who gets the harshest deal out of continually delaying retirement? Them.