A think-tank run by former prime minister Tony Blair has gained headlines by urging the government to scrap the pensions triple lock.
But former Pensions Minister Steve Webb said there is another aspect in the proposal that is “truly shocking.”
He said the more interesting aspect of the proposal is to replace state pensions with a ‘Lifespan Fund’ which people can dip into during their working life in certain circumstances.
Mr Webb, partner at consultants LCP, said the shocking aspect is that everyone would have their own unique state pension age based on their life expectancy. This, in turn, would be estimated on the basis of their NHS digital record which DWP would use for this purpose.
Mr Webb said: “This strikes me as truly shocking.”
He said the idea of linking state pension payments to individual health records and individual life expectancy is “deeply troubling.”
“Leaving aside issues of confidentiality and data quality, it is very hard to make a precise leap from health records to life expectancy. The report says that they would not want to pay higher pensions to those who had poorer health because of lifestyle choices such as smoking, but it is very hard to see how they would exclude the impact of smoking on someone’s overall health.”
Where people dispute their proposed state pension rate, the report suggests there could be an appeals process which could be an administrative nightmare.
Mr Webb responded: “We have just created a new state pension system which is relatively simple and standardised and which forms a firm basis for retirement planning. It would be a huge backward step to replace it with something fiendishly complex and highly intrusive, and which would take many decades to implement in full.”
The report by the Tony Blair Institute published today argues that scrapping the triple-lock should be the first step towards keeping government spending on pensions under control.
Tom Selby, AJ Bell director of public policy, said: “A radical plan to overhaul the state pension and replace it with a more flexible system that allows people to take a lower income but start claiming earlier might seem sensible.
“But the proposals are complex and the prospect of the government calculating an ‘actuarially fair’ retirement income for each individual based on key details like their personal health records feels somewhat dystopian, and would clearly be vulnerable to people gaming the system by over-stating ill-health and habits like drinking and smoking.”
He said it’s worth bearing in mind that the state pension was radically reformed a decade ago and those reforms will still take decades to work through – “another massive overhaul could create even more uncertainty as well as complexity.”
Mr Selby said: “The report is absolutely right that the triple-lock will need to be scrapped at some point, but it also opens up a debate on whether the state pension itself should be a stable foundation or a more flexible income people can tailor to their needs.”