The Guardian newspaper reported this week that:
A thinktank linked to Reform UK has called for the abolition of the state pension and £75bn worth of sweeping tax cuts in a “radical” report likely to influence the party's platform for the next election.
According to the same Guardian report, the Centre for a Better Britain (CFABB) said that:
“The issue with the state pension is that it's essentially a Ponzi scheme.”
Their suggestion is that current workers are unfairly funding current retirees.
They suggest replacing the state pension with a “lifetime investment account.” This would begin with a starter contribution of £1,000 for children at birth, but with people later being required to contribute up to 15% of their earnings into their personal retirement pot.
This would be a contribution rate substantially in excess of current National Insurance contribution rates, with absolutely no guaranteed outcome with regard to a pension at the end of the process.
The scheme would, however, offer a windfall to the City of London for managing all the additional funds being directed at the stock market in the meantime, which would guarantee a share price increase until net selling began as money forcibly enrolled people reached retirement age, when a collapse would almost inevitably happen unless, for reasons unexplained, the UK's birth rate suddenly increased, contrary to all long-term trends.
The state pension would, apparently, only remain as a “means-tested safety net” for the worst-off.
Bizarrely, what this supposed think tank is offering is something that looks exactly like a Ponzi scheme, which they claim the current state pension to be, entirely inappropriately.
So, what do you think?
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But not if whether you ever receive a state pension depends on the whim of a politician
I’ve come to the view that the issue with the current pension system is the private pensions, not the state pension. We all but enforce private savings, thereby taking real spending power away from people who could really do with it in a cost of living crisis, we give massive tax cuts to the most wealthy, we have huge amounts of money funneled into financial instruments that drive asset inflation, further pushing the dream of home ownership away for many.
Much better in my view to just guarantee the elderly a decent living income using a capped final salary linked pension.
The Centre for a Better Britain (CFABB) has it completely the wrong way round. It is the defined contributions pension schemes that are a dangerous Ponzi scheme. I predict that they will eventually collapse, in a few decades time, and have to be bailed out by the government.
Why do I think that? Demographic change. Over the past century the population in the developed (or developing) world has been increasing exponentially. This makes it easy for companies to grow and increase their profits, simply because they have a growing number of customers. In turn this increases their share price. Workers are encouraged to buy into shares because, over many decades, share prices have grown in real terms. And those who bought shares previously have done very well in the long term. This encourages workers to invest more creating a feedback loop.
But this will soon come to an end as the population starts to decline, perhaps as early as 2050 – it’s already happening in some countries. Population decline is due to rapidly declining fertility rates. At that point the situation will reverse. There will be fewer customers, declining profits, declining share prices, and more pensioners trying to withdraw their money. These are conditions that may precipitate a sudden and permanent collapse in share prices, thereby destroying share based pensions.
I have warned my own children about this (though I’m not sure they believe me). The best chance of a reliable pension is via the government. Only they can guarantee it.
Your conclusion is spot on
Sounds like another right wing attack on the state pension. Its needed. Personally I would reform it so that its tiered with a good high basic level and then additional amounts depending on earnings. At the same time reducing or abolishing relief for private pensions.
As we know the pension is NOT funded by taxation so thats a complete red herring. Lots of areas re taxation, reliefs etc which are more important to look at!!!
Also state pension money is spent so keeps the economy going.
This suggestion comes from a lobby group – its not a ‘think tank’.
Thank you
This is an example of the neoliberal “prophets” Henry Manne and James Buchanan and the Mont Pelerin Society’s strategy to, as Nancy MacLean writes in Democracy in Chains, “to remove government backed health and welfare, which impaired the normal workings of labour markets, remove employer provided pensions and insurance, all these need to be phased out, converted to individual savings account, in order to implement the Society’s version of liberty”.
And of course the “freed” financial services would run the savings account and make obscene profits, and who cares if the market doesn’t produce a decent pension. That’s neoliberal freedom for you.
All part of the utterly false ” we can’t afford it mantra”.
Agreed. Good reference to a great book.
Singapore operates a Central Provident Fund, where everyone is required to pay in a certain percentage of their salary into a personal pot to save for their own retirement. However, it is quite flexible and can also be used to cover housing and education costs, with a certain slice committed to healthcare costs. It is operated by a government agency, which is quite different from what is being proposed here.
This is yet another neo-liberal privatisation, grabbing public funds for private gain.
If the state pension was going to be replaced by anything then it should be replaced by a universal basic income for over 65s.
It sounds like something designed to make Fartrage and his main comrades in Ref**k along with their donors richer and everybody else (including no doubt a decent number of potential Ref**k voters) much poorer.
Unless I’m missing something.
Craig
You aren’t
Every pensioner needs at least enough money to live each day with dignity. (A “denarius” if you will.) No matter how many years they have, or haven’t worked. No matter where they have come from. No matter what their opinions are and what they look like. Only the State can achieve that with certainty. Let’s start from there.
Agreed
In the old days they were called robber barons. Now they’re called tech bros!
I fully agree with most comments about this proposal.
But my interpretation is that this is a very dangerous extension of the Neo-liberal negation of the state’s actual sovereign ability to create money to fund its activities.
This is how democracy gets side-lined and it is one of the worst ideas I have heard yet. It will appeal to an increasingly angry and hard pressed younger population who think they are supporting older people who have had everything.
As appalling as this idea is, it also extremely clever and designed to cause maximum damage.
Much to agree with