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So far in this series of articles on the Wellbeing Economics Approach, we have discussed how the current economic system has negative societal outcomes built into its core.
We’ve also discussed how creating a set of new measures will allow us to create a better, stronger, fairer and more equal society and mitigate climate change.
A radical policy agenda or a caring policy agenda?
In other words: we’ve done the theory, so now let’s start talking about the more caring and just policies that rise to the top of the agenda when we realign economic thinking with personal, societal and planetary wellbeing.
Wealthy nations shouldn’t have poor pensioners
Let’s start with the need for a Wellbeing Pension, one that pays enough for all of society to be able to live with dignity (you can sign the petition here).
The UK’s basic state pension of £156.20/week (paid to around 85% of pensioners) is one of the worst in the developed world, amounting to only 16.7% of pre-retirement wages.
Poorer pensioners can claim means-tested benefits to get £201.05/week but that’s not enough to meet even their most basic needs.
We need a Wellbeing Pension of £235.00 per week – this is the amount required to cover the basic cost of living and escape poverty, as calculated by my team at the Wellbeing think tank Scotianomics.
The UK basic state pension plus benefits is £27.44 per week (£1,425.84 per year) lower than pensioners need to live with basic dignity – that is unacceptable.
What I refer to as the basic state pension, the UK Government calls the Old State Pension. The pension paid to newly retired people (about 15% of pensioners) of £203.85 is called the New State Pension, a blatant attempt to mislead the public.
The UK Government CAN afford better pensions
The UK is by a significant margin the largest Northern European country but the others: Iceland, Denmark, Norway, Sweden, Ireland and Finland have better pension systems than the UK. The average basic pension (plus benefits) of those nations is £294.42 per week.
That is £138.22 per week higher than the UK’s basic weekly pension – even with means-tested benefits.
The UK Government cost pensioners up to £487 a year by breaking its “triple lock guarantee” that pensions would match inflation.
It was reinstated in 2023 but without the full 8% rise the year before, it is much lower than it should have been. Too little too late, as the cost of living continued to skyrocket.
Since 2014, pensioner poverty has increased from 12% to 16% for men and from 14% to 20% for women.
Can the UK Government really afford to not pay the Wellbeing Pension?
Creating a society where pensioners can afford to live with dignity isn’t optional, it’s a necessity.
Let’s be clear – paying a lower pension than almost every other country in the developed world is a policy decision made by successive UK governments of left and right.
Pensioner poverty is a choice made by successive Chancellors, whose shared goal has been to boost the City of London, by forcing the wealthy to purchase private pensions.
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Pensions are paid out of National Insurance Contributions (NICs) from working people. The UK Government’s Office for Budget Responsibility has forecast that NICs will be worth £172 billion in 2022/23.
The current cost of the State Pension system to the UK Government is £123 billion each year, with a surplus of £49 billion.
Remember that the UK Chancellor increased NIC payments in April 2022 by 1.25 percentage points, just as he broke previous manifesto promises to raise pensions to match inflation.
The UK Government is probably planning to use the NIC surpluses to raise pensions just before the next General Election but inflation will still mean that pensioners are worse off.
The Affordability of the Wellbeing Pension
If the Wellbeing Pension of £235 per week was paid by the UK Government, it would cost £154 billion annually, which is still less than the UK Government’s £172 billion in revenues from NIC’s.
Scotland NIC revenues are also in surplus, so a wellbeing pension would be equally affordable in an independent Scotland.
Raising the State Pension to the Wellbeing Pension will do more than just improve the lives of low-income pensioners.
Lifting people out of poverty is the best way to stimulate the economy, increase spending and support local goods and services.
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Pensioners living outside of poverty will buy clothes and food, heat their homes and frequent local establishments – so the extra money goes straight into the local economy and generates tax revenues.
That in turn generates VAT on goods bought and more tax on the profits made by shops.
As much as 20% of the additional cost of the Wellbeing Pension comes straight back to the Government in taxation from the economic boost it will give the economy.
As money circulates in the economy it generates profits and taxes and so, the question is: Can we afford not to pay The Wellbeing Pension?
You can sign the petition here.
Gordon MacIntyre-Kemp is the CEO of Business for Scotland, the chief economist at the “wellbeing economics” think tank Scotianomics, the founder of the Believe in Scotland campaign and the author of Scotland the Brief.
