The Lifespan Fund plan - a state pension idea from the Tony Blair Institute for Global Change

Kryten_the_Titan

Nothing like an idea to change the State Pension to get some discussion flowing:

https://institute.global/insights/economic-prosperity/the-lifespan-fund-reforming-the-state-pension-for-a-more-affordable-flexible-and-fair-future

In summary their plan recommends this be introduced in 2030:

• the pension (or fund) increases with average earnings (ie triple lock abolished)
• the fund may be accessed before what we currently call SPA, with ability to "top-up" later through further NI contributions
• allows those with lower life expectancy to access the fund sooner - but penalises those with bad life-style habits
• the Lifespan Fund is linked to NI contributions, ie 2 years of NI contributions earns 1 year from the fund

On a personal level, the conclusion I draw from this is thus: my SPA is 67 and with 40 years of NI contributions, at the age of 87 (if I'm still around), I would need to make sure annuity payments would be able to keep me shuffling along towards my ultimate exit strategy.

Kryten_the_Titan

https://institute.global/insights/economic-prosperity/the-lifespan-fund-reforming-the-state-pension-for-a-more-affordable-flexible-and-fair-future

Silvertabby

Being able to access pension benefits before retirement, as some Countries allow, would almost certainly mean the abolition of the Minimum Income Guarantee at SPA. Because we all know that some people would happily spend what they could when they could, and then expect means tested top ups in retirement.

phlebas192

https://forums.moneysavingexpert.com/discussion/6666791/the-lifespan-fund-plan-a-state-pension-idea-from-the-tony-blair-institute-for-global-change

On a personal level, the conclusion I draw from this is thus: my SPA is 67 and with 40 years of NI contributions, at the age of 87 (if I'm still around), I would need to make sure annuity payments would be able to keep me shuffling along towards my ultimate exit strategy.

I've only skim read the report, but no, that's not what they are suggesting. Think of it along the lines of your Lifespan Fund purchasing an annuity. Your SP would be based on the amount in your fund and your life expectancy when you start to take it. Whatever that amount is, you would then receive it for the rest of your life (increasing in line with average earnings) however long that is.

The biggest difference with a normal annuity is that your life expectancy wouldn't just be based on actuarial tables but also take into account your health.

The ideas presented aren't bad but they are very much a technocratic approach to a problem with no real thought given of how to sell it to the public - let alone the politicians who would need to deal with the inevitable flack that any wholescale change to the pension system would create.

nb: of all the proposals, the only one that would impact any current pensioners or those within 10 years of SPA when the change is made would be the removal of the triple lock.

Bostonerimus1

I'm immediately dubious about any idea associated with Blair or his think tank. The penalty for bad behaviour is pretty ridiculous IMO:

1. Who defines "bad life-style habits"?
2. Who would monitor your habits?…that's scary!
3. The current approach that taxes alcohol, smoking etc seems to be just fine.
4. If we assume that "bad behaviour" limits life expectancy then it's part of the "mortality credit" for everyone else in the scheme and so sort of self regulating.

phlebas192

The health related aspects are clearly the most problematic part of the proposals. They sort of assume that you could automatically weed out issues related to smoking, drinking etc and calculate a life expectancy as though you didn't have them. That seems fanciable at best. The paper simply assumes that it could be done via accessing your NHS health records.

Other parts of the proposals make much more sense. eg being able to access the fund when retraining, starting a new business, childcare etc and then topping it up agin via higher NICs (*) would help many. Choosing to take your SP earlier or later and having the amount adjusted to be acturially neutral offers greater flexibility.

• - they say NICs, presumably to avoid it looking like income tax, but they actually suggest it would be collected via PAYE tax code adjustments or self assessment.

Yorkie1

If you took the SP earlier, and thus at a lower rate so as to be actuarially neutral, does that mean you'd be eligible for a greate level of pension credit in later life?

I foresee a public health issue if people feel they can't be honest with their GP, if it would mean impacting pension later in life. GPs are hardly going to want to reveal sensitive health records (neither the time nor the inclination to be the gatekeeper for another part of the govt).

LHW99

We propose replacing the state pension with a new model from 2030: the Lifespan Fund – a flexible lifetime income-support account that individuals build up through active contribution to society.

Why stop at pensions? The whole benefits system could be based on a person's "contribution to society" with only those with no hope of undertaking meaningful work being supported by the DWP.

Used to be called "on the dole" if I remember, and you had to have paid in a certain number of contributions before you were entitled to some types of support. No support for that now from the media I suppose.

As the pensioner population grows, so does the electoral weight of the “grey vote”, meaning political parties have strong incentives to promise continuity and postpone hard decisions. Younger generations can see what this implies: they are asked to fund a system on a rising cost path while doubting they will receive a comparable settlement themselves.

Yes, and the "grey vote" doesn't necessarily support the same policies that the TBI supports. There's not actually anything stopping younger generations also voting AFAIK, and if proposals such as this keep being put forward by the various think tanks, it is no wonder younger generations begin to doubt that any form of SP will be there for them.

Albermarle

The Blair/Brown government 97-2010 did enough to f&£k up the country when they were in

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QQQQQQQQ_Y

https://forums.moneysavingexpert.com/discussion/comment/81985686#Comment_81985686

It's a throwback to the Victorian idea of the deserving and undeserving poor. The main problem with this failed model of social/health policy is the massive cost to everyone else when disease and other factors are taken into consideration - from a purely practical perspective the costs far exceed any benefits. Self-defeating in a myriad of ways.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81985818#Comment_81985818

If you took the SP earlier, and thus at a lower rate so as to be actuarially neutral, does that mean you'd be eligible for a greate level of pension credit in later life?

The paper addresses this - you would only be allowed to take the SP at a lower rate if you could prove you had additional resources to at least match the standard rate.