A body has floated the idea that National Insurance should be scrapped and pension saving become mandatory.
The Institute for the Study of Civil Society (Civitas) wants reforms that would abolish National Insurance payments and instead replace them with what they call ‘personal welfare accounts’, whereby people would take more responsibility for their own retirement income rather than rely on the state.
The think tank has argued that forcing people to save in a private pension would help to ease the burden of old age on the state and that National Insurance is now ‘no longer fit for purpose’.
Civitas thinks the new system would primarily be about saving for retirement, but it could also be used to provide a means of finance if a person is unemployed, long term sick or wishes to take time away from their careers to raise a family or look after an elderly relative.
In addition the ‘personal welfare accounts’ could help to pay for university tuition fees and even be used to pay for long term care in old age.
There are concerns that people will now spend almost as long in retirement as they did paying off mortgages and this is putting a huge financial burden on the state.
The UK currently has almost 11 million people aged 65 and over and this is set to rise considerably over the next decade.
Conversely, Civitas is also recommending that state pensions be means tested. They feel that wealthier pensioners should not be entitled to a state pension.
The think-tank feels that workers should be made to save towards a private pension instead of relying on the state to provide for them in old age. This would mean that the state pension would only be available for those who are most needy.
They would also be unable to opt-out of the Government’s auto-enrolment workplace pension scheme so that the onus on providing a retirement income would be on the individual and not the state.