Professor Colin Talbot sees the state pension as “psychologically different” to other benefits.
The state pension is referred to in legislation as a benefit, and campaigns to get the terminology changed have been rebuffed by government, but Prof Talbot says he sees it as “more like an occupational pension scheme.”
The 71-year-old, who is a professor emeritus at the University of Manchester, says he believes that if the state pension is not recognised as different to other benefits, then it could pave the way for it to become means-tested in the future.
“I see the state pension as a bargain between myself and the Government. I paid in to national insurance for 48 years, and I get a state pension at the end. That’s how national insurance has always been sold.”
To get the state pension, people have to build up several years of qualifying national insurance (NI) contributions, either by working and paying for this, or getting NI credits.
Several other “contributory benefits” such as employment and support allowance, also work this way, but Prof Talbot believes the state pension is different.
“It’s psychologically different. There’s a social contract, and people have expected to get a state pension in return for these contributions” he said.
People’s NI contributions throughout their working life are not invested into a pot for their retirement. Current NI payments are used to pay for the state pension now, rather than when those paying it retire.
But Prof Talbot says this does not change his beliefs. “Many other state pension schemes around the world put money into a fund. Our Government chooses not to do that with our payments, but that doesn’t change the premise of how it works – I still see it as deferred income” he says.
New laws from the government mean an insistence on classifying the state pension in exactly the same way as other benefits could have consequences in the future, he believesd.
Changes to new data protection legislation will give the Government powers to look into bank accounts of benefit claimants as well as those relying on the state pension.
The amendment to the Data Protection and Digital Information Bill, introduced at the 11th hour in the bill’s third reading last week, prompted concerns from MPs that ministers could be gearing up to change the state pension so it is no longer universal, which Government officials have denied.
But Professor Talbot has said: “The only plausible explanation to me, to including the state pension in there with all those other benefits is that there’s a pathway to making it means-tested. That’s why I think we need to careful about classifying it in exactly the same way.”
The state pension is currently not means-tested, and individuals who qualify through NI contributions can collect it once they reach 66.
There will then be a phased increase in this age to 67, and eventually 68.
But there has also been concerns expressed around it cost. Currently, under the triple-lock policy, the state pension rises each year by the same level as inflation, average earnings or 2.5 per cent, whichever is the highest.
In April 2024, the state pension rise will make it worth £221.20 a week for the full, new flat-rate state pension and £169.50 a week for the full, old basic state pension.
Figures from the Institute for Fiscal Studies (IFS) suggest that by 2050, a reasonable estimate would be that the triple lock will add between £5bn and £45bn a year to state pension spending. And estimates from the Office for Budget Responsbility (OBR) suggest that by the 2070s, paying for the state pension and associated benefits such as pension credit and winter fuel payments could cost 8.1 per cent of the country’s gross domestic product (GDP), up from just under 5 per cent currently.