A prominent member of the House of Lords has issued a stark warning, urging the government to introduce means testing for the state pension to secure its long-term survival.
Call for radical pension reform
Craig Mackinlay, writing in the Telegraph, has called on the Labour Party government and the Department for Work and Pensions (DWP) to implement significant changes. Mackinlay, the member for Richborough, is a former MP for South Thanet who served on both the DWP and Public Accounts Select Committees. He is also a qualified chartered accountant and tax adviser.
He argues that the current system is under immense demographic pressure. "Can the increasingly top-heavy population age pyramid – which is heading towards two workers per pensioner (vs 4:1 in the 1960s) – generate enough tax to support the retired?" he questioned.
Proposed solutions and looming challenges
Mackinlay's proposed solution involves a "less for longer" system. This model would allow earlier access to the state pension but at a reduced level, calculated based on actuarial life expectancy.
While acknowledging that retirement poverty has significantly reduced due to the triple lock and the post-2016 state pension, he highlights future hurdles. He pointed to the escalating cost of healthcare for an ageing population and questioned whether plans to raise the retirement age to 68 after 2046 are sufficient.
A pressing issue for Chancellor Rachel Reeves is the fiscal conundrum expected from April 2027. At that point, the state pension will exceed the frozen personal tax allowance of £12,570 a year.
The means-testing debate
Mackinlay suggests that after a century of universality, means-testing could be the government's "wizard solution". However, he cautions that such a move risks creating "another uniquely bad British incentive to drop out and rely on the state."
The full new State Pension currently stands at £230.25 per week. The amount an individual receives depends entirely on their National Insurance record. The DWP encourages people to check their State Pension forecast to understand their potential entitlement.
