"Why not give everyone a funded pension?" asks someone called Harvey Cole in Prospect. Give everone £10,000 at birth and pay them interest on it at a real rate of 3 per cent (is that a real three per cent?) to give the recipients an annuity of £5,000 in today's money, obviating the need for state pensions. In terms of financing it wouldn't ever cost more than £42bn a year. The demands on GDP would be small.
The uniform pension is desirable and the pain seems relatively small, (not sure how much 2.25 per cent of GDP is on income tax) but where does the £1,350bn get invested? In 60 year gilt zeroes? Do you three per cent over inflation on those? I think not and the model is very sensitive to this.
Suppose you get only 2 per cent, then the cost is 80 per cent higher. By the same token however there is no chance that there wouldn't be any state pension which also has a cost. Oh, for better generational accounting! Still surprising to see such an incomplete analysis in Prospect.
