Treasury and Work and Pensions

I have taken a lot of interventions. A citizen’s pension would ensure that all our pensioners are lifted out of poverty and have a decent basic pension on which to build. It would tackle the problem of disincentive under the current pension credit system. It could be made affordable by utilising the amounts currently paid in basic state pension and pension credit and by reforming the system of tax relief on private pensions. There is no evidence that the current system of pension tax relief encourages private savings; indeed, it costs a fortune as it is massively geared to the better off. Turner pointed out that it costs about £12 billion, with another £8 billion in national insurance relief. That is a massive subsidy to private pensions instead of using taxpayers’ money to provide a proper state pension. Worse still, more than half of the total cost of tax relief on private pension contributions is received by the richest 10 per cent. of the population. It is high time that the tax relief system was reformed to become much more progressive and transparent and, in particular, to encourage low and moderate income earners to save for retirement and reward those who do so. Instead of doing that, the Government seem intent on raising the state retirement age, which will have a disproportionate impact on the poor and in areas where people have lower life expectancy. For example, a man in Glasgow has a life expectancy of 69.3 years, compared with more than 80 for a man in Kensington. Clearly, the Glasgow man will seriously lose out if the pension age is increased. To be fair, Lord Turner recognised the problem and suggested that it should remain at 65, but the Government rejected that in their response, which said that they would consider it nearer the relevant time. The evidence on life expectancy already exists, and one has to ask what they think is the relevant time given that they have already decided to raise the retirement age.