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

Bostonerimus1

SP can already be deferred in return for a larger payment so allowing it to be taken early for a smaller payment doesn't seem that radical. That's exactly what is allowed in the US system with reduced payments allowed at age 62. However, there might be labour force impacts as it would allow people to leave work earlier. Maybe AI will be in the mix too, but historically a declining labour force has not been good for growth.

Kryten_the_Titan

• From original post summary, future increase of SP (or "the fund"), being linked to average earnings is something that needs to happen at some stage - SP increases are surely unsustainable.
  
  As for the proposed "fund". Accessing the fund sooner with good reason, for example terminal illness and having already built up at least X number "credits" seems reasonable. Accessing the fund sooner for no good reason - eg to go for a cycling(?) trip around the world - would not seem to be reasonable.
  
  

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81985896#Comment_81985896

While the triple lock is not sustainable for eternity, an alternative that allows some to draw their SP "fund" earlier than the standard SP age seems like it would also be introducing a new and ever-increasing cost to the system that is unfunded. The reference to the "fund" in the case of the SP is probably erroneous, given that the funding model for SP has never created a "fund" or "pot" but has always met today's outflow from today's tax take (whether that is tax or NI or magic beans or whatever the Government call it).

QQQQQQQQ_Y

https://forums.moneysavingexpert.com/discussion/comment/81985972#Comment_81985972

So you're describing it being funded from general taxation and not unfunded then?

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81986075#Comment_81986075

Yes, SP is and always has been funded from the current period taxation.

It is just the references to "accessing the fund sooner" make the SP sound more like a DC pension where there is an accumulated pot of money which can be drawn down. There is no such accumulated pot in the case of the SP. Hence, the SP is "unfunded".

I am being careful not to be political in my comments. The demographic profiles coupled with triple lock mean that there are already economic challenges with the SP growing as a total demand on the tax take. Any change to SP rules that permits some to access the "fund" earlier than the standard SP retirement age will only increase the overall cost of SP. Such a change would be totally contrary to the direction of travel for SP eligibility over the recent decades.

QQQQQQQQ_Y

https://forums.moneysavingexpert.com/discussion/comment/81986148#Comment_81986148

Whereas I think the term "unfunded" is a politically loaded term which freights-in its own ideology with the implication that a spending commitment cannot be resourced sufficiently. The reality is that money is not being hypothecated - but then we don't do that for any spending commitment that I can think of (feel free to correct me), but the term is only ever referred to in debates about social provision.
We could, of course, have set up a sovereign wealth fund for example instead of selling-off North Sea resources and funded say defence or social spending from that but chose instead to fund them from current spending. "Unfunded" is a politically-loaded term hiding in plain sight.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81986190#Comment_81986190

The trouble with the term "fund" in relation to pensions is that "fund" has a specific meaning in pension parlance - the "fund" is the assets held by the pension - whether the individual investment fund accumulated through DC contributions or the scheme investment fund accumulated for DB schemes. Fundamentally, in pension terminology, "fund" refers to a pot of money. It is not wise to use the phrase "fund" in relation to the SP as the SP has never accumulated an investment fund. This is the difficulty of mixing pension terms with political terms.

mrklaw

its over-complicated and the ‘access early for life issues’ sounds dodgy and high potential to allow people to screw themselves over or for governments to not give guaranteed amounts at retirement if you’ve spent it all.

The logical approach is much simpler and I think plenty of groups actually directly/indirectly involved in inputting into decision making are pretty aligned.

• allow the SPA to float based on average life expectancy - assume this will drift towards 70 which helps affordability and turns SP more into longevity/backstop protection combined with the generation coming through with auto enrollment so at least some private pension
• remove the triple lock and tie the state pension value to some defined percentage of average earnings or perhaps minimum wage (which presumably itself tracks average earnings?)
• optional but likely needed: ratchet up auto enrollment contributions to a more practical level - eg 12-15% perhaps based on earnings to protect low earners? \

The trick is getting there. I liked a recent video where someone was suggesting moving in this direction in advance, while the triple lock is still below the target value so you have a few years of the triple lock still and then it tails off when the target is met and it locks there. But I assume you’d need some kind of independent body to provide this advice as no government will likely take this on unilaterally. The same body that reports on state pension age would seem to make sense to me

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81985972#Comment_81985972

 The reference to the "fund" in the case of the SP is probably erroneous, given that the funding model for SP has never created a "fund" or "pot" but has always met today's outflow from today's tax take (whether that is tax or NI or magic beans or whatever the Government call it).

To be strictly correct, there is a National Insurance fund, that is kept separate from the rest of the Govt accounts. It is funded with NI contributions and is used to pay the State pension. It is normally significantly in surplus, and this is used to suppliment the main NHS funding, amongst other things.

However as it is all based on current year NI coming in, then in normal pension terms you would probably still refer to the State Pension as an unfunded scheme I guess.

LHW99

To be strictly correct, there is a National Insurance fund, that is kept separate from the rest of the Govt accounts. It is funded with NI contributions and is used to pay the State pension. It is normally significantly in surplus, and this is used to suppliment the main NHS funding, amongst other things.

In that case, maybe it's not the pension system that is a problem, just paying for everything else!