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\n Photo by Chip Somodevilla\/Getty Images<\/p>\n
\n Photo by Chip Somodevilla\/Getty Images<\/p>\n
In the autumn of 1999 Tony Blair was attending the opening of a nursery when he was confronted by an elderly woman holding a sign. The sign was an early expression of a view many people would come to hold over the following decade. It read: \u201cBlair, you are a c***\u201d.<\/p>\n
The reason this \u201ctypical sweet granny\u201d, as Blair remembers her in his memoir,\u00a0My Journey, was annoyed was that under his government, the state pension was due to rise by the rate of inflation, which had just hit its lowest point in 36 years (1.1 per cent); the result was that the sweet grannies were going to get an extra 75p per week, which they thought was stingy (even though it was the same increase in their spending power they\u2019d had in previous years). The encounter led to Blair\u2019s well-known observation that \u201cYour average Rottweiler on speed can be a lot more amiable than a pensioner wronged, or, to put it more accurately, believing they are wronged.\u201d<\/p>\n
Well, the grannies might want to get their placards out again, because as of this morning, Blair is campaigning not only for the \u201ctriple lock\u201d \u2013 which guarantees pensioners\u2019 incomes rise at least as much as workers\u2019 pay, if not more \u2013 to be removed, but for the whole system to be replaced by a new \u201cLifespan Fund\u201d.<\/p>\n
Reform of the pensions system is one of the biggest problems in British politics. It is hugely expensive \u2013 \u00a3146 billion in the last financial year \u2013 and much of that goes to people who don\u2019t really need it. Keeping it as a constantly uprated universal benefit is projected to cost a further \u00a385 billion a year (in today\u2019s money) by the time today\u2019s youngest workers retire (assuming they haven\u2019t all been replaced by robots).<\/p>\n
Subscribe to the New Statesman today and save 75% <\/p>\n The Lifespan idea is more like a private pension. People would still build up their entitlement through National Insurance payments, or credits if they\u2019re not working. Each year of contribution would add half a year of state support to their account, up to a maximum of 20 years of support.<\/p>\n However, people would also be able to use some of their Lifespan money early \u2013 for example, when Blair\u2019s friends in the AI industry put them out of work \u2013 and while this would have \u201csafeguards\u201d, it would mean some people might reach retirement age entitled to only ten years of support. They might then have to reply on a futuristic version of Pension Credit called \u201clifespan top-up\u201d. What could go wrong? \u00a0\u00a0<\/p>\n Ah, but the idea of \u201cretirement age\u201d would also be consigned to the past. Under the Blairspan scheme, people would use an app \u2013 perhaps the icon would be a little cartoon Tony, holding a coin \u2013 to see how much money they would be entitled to when they retired. Then, when they realised it was a pittance, they could grudgingly decide to put in another decade in the Amazon fulfilment centre.<\/p>\n The principle this represents is a transfer of risk. The current state pension is a gamble for the government, in that if you live longer, you\u2019ll cost the state more money. The Lifespan scheme, as the Tony Blair Institute puts it, \u201cwould allow people to choose when to retire, instead of everyone being tied to a single State Pension Age\u201d. This means the person using the pension has to make the gamble, as they do with a private pension: the later you retire, the higher your income will be \u2013 but then if you get squashed flat by a bus after a year\u2019s retirement, you\u2019ll be kicking yourself. \u00a0<\/p>\n There\u2019s another principle which reduces the financial risk to the state, and potentially the cost of the system, which is what looks like a form of means testing. \u201cThe annual pension someone received would depend not only on the size of their fund,\u201d the TBI explains, \u201cbut also on their age and health when they converted it into a pension. This would be done on an actuarially fair basis, using population data and information from an NHS digital health record.\u201d It is certainly possible that future governments could get into all sorts of fights over what counts as an \u201cactuarially fair\u201d amount to give to different groups \u2013\u00a0the Waspi women<\/a>\u00a0are an example of how long people will engage in a fight for pension income to which they\u2019re clearly not entitled \u2013 but some form of means testing seems inevitable in a system this expensive.<\/p>\n But if that\u2019s what you want to do, why all the fuss to construct a fancy new system? Why not keep the triple lock \u2013 which is also important to current workers, because it decides what they\u2019ll get in retirement \u2013 and just stop paying the state pension to people who have private pensions in excess of a million pounds? (Or some form of slightly more sophisticated taper, as we use in the tax system.) This would save vast amounts of money that is currently given to people who absolutely don\u2019t need it. This would also provide the opportunity to get rid of National Insurance at 8 per cent and increase income tax by 5 per cent, and to be straight with the public that the state pension is not a collective investment scheme, it\u2019s just part of the system of taxation and benefits.<\/p>\n Those genuinely wealthy pensioners would fume at the loss of their Champagne money, but they\u2019ll manage; they\u2019ll certainly have the money to make a nice new sign.<\/p>\n![](\"https:\/\/dl6pgk4f88hky.cloudfront.net\/2021\/09\/TNS_master_logo.svg\"){kind=logo}
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