The public may be more open to pension reform than we think
4 min read
Few areas of government policy contain as many “sacred cows” as the pensions system. Successive governments have treated major changes as politically dangerous, assuming people are strongly attached to existing protections.
The triple lock attracts the most attention, guaranteeing that the state pension rises by the highest of earnings growth, inflation, or 2.5 per cent. But other politically sensitive features include pension freedoms, which allow people to access defined contribution savings from age 55, and generous tax relief on pension contributions and withdrawals.
Changing these entitlements is often described as “good policy, but bad politics”. However, few stop to ask what lies behind people’s attachment to them, or whether public attitudes are really as fixed as politicians assume.
A new Fabian Society and Survation survey offers some clues. It finds that 55 per cent would support replacing the triple lock with a different mechanism, almost 65 per cent support some restriction on pension freedoms, and 72 per cent think higher earners should pay more tax on their pension savings.
There are significant differences between generations. By a majority of two to one, Gen Z and millennials want to replace the triple lock, while baby boomers and the silent generation back keeping it by two to one. But a closer look reveals a more complicated picture.
First, attitudes to change appear closely connected to people’s concerns about their own dignity and security in retirement. People who expect to be worse off than others their age are a third less likely to support reducing tax relief for higher-income pensioners, even though they are less likely to be affected. A similar pattern appears across other questions, suggesting those who feel less secure may place greater value on existing protections.
Second, uncertainty about retirement is compounded by gaps in people’s understanding of their own position. Forty-six per cent believe they are not on track to reach the minimum retirement living standard, currently around £1,150 per month for a single person and £1,900 for a couple. But based on the savings they reported, 41 per cent of this group appear to be mistaken.
People acknowledge the limits of their knowledge too. Less than half said they knew either “a great deal” (7 per cent) or “a fair amount” (39 per cent) about pensions.
Third, the public cares about fairness. More than two-thirds, 68 per cent, believe the state pension should increase at the same pace as wages, so pensioners become neither better nor worse off compared with others and the cost to taxpayers remains steady. Older generations are even more likely to agree than younger ones.
In practice, linking the state pension to wages would often mean a lower increase than under the triple lock, which can increase pensions faster than earnings when inflation or the 2.5 per cent floor is higher.
Those on higher incomes are also often open to contributing more. Sixty-eight per cent of additional rate taxpayers and 59 per cent of higher rate taxpayers agree that people like them should contribute more towards a pensions system that works for everybody.
These findings raise wider questions about how support is distributed between income groups and generations. The triple lock has helped raise average pensioner incomes to the same level as average workers, but the poorest pensioners have become comparatively worse off as access to means-tested support has fallen. Meanwhile, today’s workers, whose taxes fund the triple lock, face economic pressures very different from those experienced by many current pensioners.
The UK’s tax treatment of pensions is also very favourable by international standards. It is one of only a handful of OECD countries where someone with a pension pot of up to £1.07m may never pay tax on a quarter of their final pension – at contribution, accrual or withdrawal stage.
Pension freedoms can also produce very different experiences of retirement. Some people with sufficient private savings can leave work more than a decade before the state pension age. Others face a difficult choice between their health and finances as the state pension age rises.
Taken together, the findings suggest public attitudes are shaped not simply by attachment to existing policies, but by people’s sense of security and fairness.
That does not make reform politically easy. But it challenges the idea that pensions are untouchable. The public may be more willing to debate change than Westminster assumes, and our research shows there is space for a more serious conversation about how the system should work in the future.
Sasjkia Otto is a senior researcher at the Fabian Society
