State pensions and public sector pension schemes should be scrapped and replaced with individual defined contribution pots, according to recommendations from a Scottish think-tank
Reform Scotland today issued proposals for a Universal Contributory Pension, which it claimed would provide workers with greater security and certainty as well as a sustainable solution for the country's public finances.
This new kind of pension would be mandatory, with all workers contributing at least 8% of their salary. It would be chosen and owned by the individual, be fully transferable and the worker would be able to select their own retirement age at any time after 60. There would also be a flat rate of income tax relief and Pension Credit will continue to provide a minimum income guarantee.
National Insurance would be scrapped and income tax increased by 7p to cover the fall in revenue.
Ben Thomson, chair of Reform Scotland, said: 'The key problem with our pension structure is that those faithfully paying National Insurance and those paying into a public sector occupational pension scheme have no ownership over their pension assets. They are not paying into a personal pot for themselves - they are paying for today's pensioners and are dependent on an increasingly stretched next generation to pay for them.
'This is hugely insecure and unsustainable. It's time to grasp the nettle on pensions and end the conspiracy of silence that exists in all political parties on this issue.'
Although emanating from a Scottish think-tank, the paper made no reference to the current independence debate.
'Reform Scotland believes that the pension system in the UK needs to be addressed, regardless of whether this is done by a Scottish Government in an independent Scotland or by a UK government for the whole of the UK,' the organisation said.
Responding to the report, the Department for Work and Pensions said that they government had acknowledged that too many people were not saving enough for their retirement.
A spokeswoman added: 'The UK government is legislating to simplify the state pension, to provide a firmer foundation for retirement saving. Action is being taken to change state pension age to ensure the system remains sustainable.
'At the same time, automatic enrolment in workplace pensions will see millions start saving or save more for their retirement - since 2012 we've automatically enrolled 2.9 million people into a workplace pension.'
