National Insurance should be scrapped and enrolment in a private workplace pension scheme made compulsory, a think-tank has suggested.
In a report published today, Civitas argues that National Insurance is 'no longer fit for purpose' and recommends it be replaced with personal welfare accounts.
Peter Saunders, author of the Beyond Beveridge report, said that abolishing National Insurance would undermine the case for a universal state pension. It would necessitate means-testing the state scheme and for enrolment in the government's new work-based pension programme to be compulsory.
'Means-testing the state pension, to target state benefits more precisely on those in need, is not only a sensible and desirable policy - it may be an unavoidable one,' Saunders said.
He claimed that the UK government currently owes more than £5trn in pension obligations - £4.7trn of which is unfunded. This equates, he suggested, to 342% of UK GDP.
'The proposal to make retirement saving compulsory is intended to rescue and strengthen the contributory principle, weaning the nation off benefits dependency and encouraging people to take more responsibility for themselves.'
Saunders added that private pensions could be topped up with the proceeds from the sale of public assets, such as Royal Mail, the part-nationalised banks and mobile phone licence auctions.
People would be able to borrow against them to meet university costs and provide an income.
