Bold – and destined never to happen. The OECD pensions plan

By Chris Rogers May 2, 2017 1:50 pm

Members of respected economic organisation the OECD must have been watching – or reading – Robin Hood.

The renowned international policy forum made an intriguing suggestion last week. Britain should scrap state pensions for well-off pensioners, and should instead focus resources on those with more modest financial means. As interventions go, it could hardly have been better timed, given Theresa May’s ‘will she, won’t she’ over the Tories’ pension triple-lock – long a favourite of former Chancellor George Osborne, but now perceived as perhaps a millstone around the neck of the Treasury.

The principles behind the OECD’s recommendation aren’t new. After all, the debate over pensioners’ bus passes and TV licences has been going on for years. And, like those arguments, there is much to applaud within the OECD’s suggestion of focusing state pensions on the sections of the population most in need. In the same way it’s difficult to make the argument that anyone who’s made their fortune needs a free bus pass, it’s equally challenging to make the case for them receiving a state pension.

In the broader political context, the OECD’s suggestions also have merit. Funding of public services, notably social care, is a constant struggle for ministers. So would providing extra cash, in the form of an increased pension (at the expense of those who are better off) help address some of the UK’s fundamental societal issues that year on year see pensioners struggling to pay heating bills, and sometimes deeply in need of public services?

While the OECD is entirely right to make the suggestion, if only to prompt a debate, the reality is it’s not going to happen. Theresa May could win every seat in the House of Commons, and it still wouldn’t happen.

Set aside the practical difficulties with introducing such a measure (which would almost certainly require means testing – a red line if ever you saw one) for a second. It would, quite simply, be fundamentally unpopular amongst pensioners who would, not unreasonably, be worried at the prospect of being left out of pocket – particularly those who might experience significant changes in their quality of living as a result. And this brings us to the strength of the ‘grey’ vote.

Ours is an ageing population, making the older demographic critical in any election. If you need proof of the power they hold, just take a look at the breakdown for the EU referendum less than a year ago. You can make a strong case that it was the over 65s that set us on the path to Brexit.

Hence the efforts of all the political parties to appeal to the older members of the electorate. Which brings us back to the triple pension lock, and Tory torpedoing of any suggestion we might get rid of free bus passes and TV licences for better-off pensioners (albeit that a deal was struck with the latter under which the BBC picked up some of the cost).

So, while the OECD’s suggestion is not without merit, it’s likely to get less than short shrift. Which is a shame. It might not be the ideal solution, but should prompt a much needed discussion.

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