A proposal from a leading think is calling for those of state pension to pay National Insurance to the tax man
State pensioners are being called to "contribute" more in tax and pay National Insurance under a new proposal being drawn up by a leading think tank.
The Intergenerational Foundation has published a sweeping set of proposals urging Prime Minister Andy Burnham and Chancellor John Healey to overhaul the UK's pension system in the name of generational fairness.
The think tank's recommendations, issued in response to the Second Pensions Commission Interim Report, suggests the Labour Government end the National Insurance exemption for working pensioners.
Other proposals include abolishing the triple lock, increasing the state pension age to 70 by 2035, and beginning means-testing wealthier retirees.
Under current rules, individuals who continue working past state pension age are not required to pay National Insurance Contributions on their earnings.
However, this is a carve-out the Intergenerational Foundation argues can no longer be justified as younger Britons continue to pay towards the triple lock and other pensioner benefits.
The report stated: "This exemption is increasingly difficult to justify. More people are working beyond state pension age. Many are doing so by choice and have substantial pension or asset wealth."
Scrapping this exemption would widen the tax base and create a more level playing field between age groups, the think tank contends.
The report added: "If older people continue to earn income from employment, there is a strong case that they should contribute on the same basis as younger workers."
Furthermore, the Foundation argues the change would also better reflect the modern reality of extended working lives across the economy.
On the triple lock, the think tank asserts that maintaining it will drive state pension expenditure upward in a manner that is both arbitrary and unpredictable.
Instead, the Foundation proposes capping annual pension increases at CPI inflation through to 2030-31, after which rises would be pegged to a blend of inflation and earnings growth.
This would deliver a more predictable and fiscally sustainable uprating framework, the organisation argues. Crucially, the Foundation does not want savings from scrapping the triple lock to simply disappear from the pension system.
It recommends channelling a portion of those funds toward the least well-off retirees, suggesting the creation of a new Low-Income Pension Supplement available to households already in receipt of Pension Credit.
The think tank has previously advocated raising the State Pension age to 70 by 2035, with an automatic adjustment mechanism tied to life expectancy taking effect thereafter specifically.
Alongside this, the Foundation urges the Government to begin shifting toward a more targeted State Pension by exploring options to reduce or eliminate entitlements for the wealthiest retirees through income and asset testing.
