The UK government should consider adopting New Zealand's state pensions regime if it wants to shrink Britain's massive savings gap, says the Pensions Policy Institute.
Speaking at a PPI discussion seminar this Tuesday, director Alison O'Connell urged government officials to take on a similar approach to state pensions as the one New Zealand is currently using.
The NZ government is at present granting all its pensioners a flat-rate state benefit, called the Citizen's Pension, which its based on residency instead of work history.
This approach has effectively left NZ, which is not as rich as the UK on a capital basis, with much less pensioners in poverty compared with Britain. Furthermore, the country has no savings gap at all, which has been achieved without any kind of savings incentives, O'Connell said.
Implementing NZ's model would not only help diminish the UK's savings hole, O'Connell said, but it would also encourage people to save more as everyone would receive the same state pensions regardless of whether they have any additional savings or not.
Additionally, the Citzien's Pension would be cheaper to run, reduce overall pensioner poverty and would also make it easier for the government to calculate future spending as the cost to the state would become more certain, she added.
The PPI believes this approach could be affordable in the short-term, but could also remain so in the long-term if state pension age was increased to the age of 70.IFAonline
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