An intergenerational contract: Policy recommendations for the future of the state pension

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The state pension is the foundation for many people’s retirement income and helps to protect people from falling into poverty in old age. It has changed considerably over the last 75 years in response to societal and public needs, with the most recent reforms introduced in April 2016 designed to simplify the system.

Today, the state pension is at a critical juncture, facing questions over affordability and intergenerational fairness in the context of an ageing population and increasing longevity.

Along with the Policy Institute at King’s College London, the Standard Life Centre for the Future of Retirement has carried out a year-long study working with the public to understand views and expectations of the state pension and present policy recommendations make the system both fair and sustainable, and support people at risk of missing out as the state pension age rises.

History of Midlife MOTs

Other initiatives aimed at people in midlife have been previously delivered such as ‘Mid Life Career Reviews’ focusing on work and skills, or NHS midlife health checks. But the concept of a holistic Midlife MOT covering health, wealth and work was first recommended in John Cridland’s review of the State Pension Age in 2017, with the aim of supporting people in the context of rising state pension ages. Following this, a few organisations in both private and public sectors across the UK began developing various MOT offerings aimed at people in midlife. These often included elements of self-assessment, information provision, and nudge to action.

Why do changes to the state pension matter to us?

The state pension is part of an intergenerational social contract, but our research shows that not everyone knows what they have signed up to, and many others are worried that the deal might not look so good when it is their turn to benefit.

We found high levels of misconceptions about the state pension, such as beliefs that everyone has their own ‘pot’ of national insurance and a lack of understanding of what is needed to get the full state pension. It is important for the public to understand the policy, but equally it is essential for policy makers and politicians to understand the public. People expect the state pension to provide the basics, either to give you a minimum to live on in retirement or to act as a building block for your own savings. We need any future reviews to fully involve the public and take people’s expectations.

A strong message from our deliberative work was the public’s desire for changes to the state pension system to ensure it continues to serve its role as part of a social contract into the 21st century effectively, fairly and with trust. While some changes should be considered in the next state pension age review, we believe there are policy reforms which could be introduced now to make a real difference.

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“Even though the state pension is an intergenerational contract, not everyone knows what they have signed up to. Our polling shows over half (53%) of 25-49 year olds think there probably won’t be a state pension by the time they retire. This is concerning because if more people are living a hundred year life, they need some certainty and trust about the fundamentals of what will be there to support them.” Patrick Thomson

Joining Patrick Thomson, Head of Research Analysis and Policy at the Standard Life Centre for the Future of Retirement to discuss the future of the state pension were:

• Sir Steve Webb, formerly Minister for Pensions, now partner at Lane Clark & Peacock
• Szu Ping Chan, Economic Editor, Telegraph
• Carl Emmerson, Deputy Director of the IFS
• Suzanne Hall, Director of Engagement at the Policy Institute, King’s College London