Our Views

Are these the best ways to tackle inter-generational unfairness?

The House of Lords has published a report aimed at tackling inter-generational unfairness, and the growing gap in wealth between younger and older people in the UK.

There are some reasonably radical proposals within the report, including the removal of the state pension triple lock, getting rid of free television licences for the over-75s, and even doing away with free bus passes for pensioners.

It’s an important issue to address because the retired population have higher average incomes than younger people. This is an unusual situation and something that appears to be fueling inter-generational unfairness. Within their report, ‘Tackling Inter-generational Unfairness’, the Lords say that “inter-generational fairness should offer the opportunity of a fulfilling life.”

A combination of low wage growth, difficulty getting onto the property ladder, and lack of government support have all made this opportunity for a fulfilling life harder to obtain for younger people. Within the report, it says that one in three of the babies born in the UK today will live to celebrate their 100th birthdays.

As a result, we need to re-imagine what retirement means and how it might be experienced. Looking at some of the specific proposals within the report, the headlines have been grabbed by the suggestion to get rid of the state pension triple lock. The coalition government introduced this mechanism in 2010. It’s designed to ensure that state pension incomes rise each year by at least the level of price inflation or average wage growth.

With more people reaching state pension age, this triple lock guarantee is becoming less sustainable, diverting public funding from essential services. As a result, members of the younger generations are effectively subsidising state pension increases for older generations.

The report proposes that the state pension should rise each year in line with average earnings. Doing this would provide parity with the income increases experienced by younger people. Other state benefits are also allocated for the axe in the report, including free bus passes for the over-60s. Free television licences for the over-75s will also be scrapped if the government adopts the proposals, along with the Winter Fuel Payment for those born before November 1953.

One proposal contained within the report that we’ve seen before, as a suggested solution for funding the increasingly costly adult social care bill, is to extend National Insurance contributions past state pension age.

As things stand, if you keep working past state pension age, you don’t keep paying National Insurance contributions. The proposals in the report would see contributions made through an alignment of the National Insurance contributions threshold with the income tax personal allowance. There’s a call in the report for the reform of the current council tax system, which would reflect the value of the property, instead of relying on outdated property valuation bands.

A method to delay council tax payments for elderly residents on low incomes would also be introduced. Commenting on the report, Alistair McQueen, Head of Savings and Retirement at Aviva said the spirit of inter-generational unity in the UK was at risk.

“Without positive long-term action, an inter-generational storm may be on the horizon. “This is an important and wide-ranging report. It deserves careful and thorough consideration we should avoid any rush to make judgement.” “We are pleased to see the focus given to the inter-generational challenges of a longer working life, alongside those of housing, education, community, taxation and government planning. The report is correct to state that yesterday’s simple three-phased approach to life – education, work and retirement – is coming to an end. We must all be prepared for the prospect of a more fluid and fuller working life.”

Alistair McQueen, Head of Savings and Retirement at Aviva
Jon DoyleAre these the best ways to tackle inter-generational unfairness?