Scrapping payments to wealthiest 5% to 10% would allow government to give more to people in greater need, says thinktank

This article is more than 3 years old

This article is more than 3 years old

Britain should stop giving the state pension to the rich and instead spend the money on benefits for the poor, according to the Organisation for Economic Co-operation and Development.

The Paris-based thinktank said that ending payments to the wealthiest 5% to 10% would allow the government to give more to people in greater need of support.

Under the current system, anyone who has paid national insurance for 30 years is eligible for the state pension, regardless of wealth.

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In comments reported by the Financial Times, Mark Pearson, deputy director of employment, labour and social affairs with the OECD, said that like other countries, the UK faced the rising costs of an ageing population, with more pensioners and fewer people of working age.

“Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?

“Or another way to ensure an adequate pension is to think about whether the pension should only be paid to those who really need it, to ease the tyranny of the maths. Giving less [pension] to the people at the top would free up resources to increase general benefits.”



Pearson said Britain’s pension system was among the least generous of the OECD’s 35 member countries. The basic state pension is worth £6,360 a year, and the full new state pension introduced in 2016 is worth £8,297 a year.

“The UK pension is pretty low,” he said.

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Under the existing system, the basic state pension increases each year by the same as average earnings, the inflation rate or 2.5% – whichever is the highest.

Tom McPhail, head of policy at Hargreaves Lansdown, rejected the OECD’s idea of removing the state pension from the richest members of society.

“It sounds like a pretty bad idea. If you want to take money away from the rich, the tax system is usually a better place to go,” he said.

“It has the potential to be quite socially divisive and one of the essential and valuable elements of the state pension is the reasonably clear and simple entitlement structure – if you pay your national insurance, you will qualify for it.”

McPhail added it would be politically unwise to start undermining the principles of the universal state pension, and could potentially exacerbate intergenerational tensions.