It is hard to trust anything the Conservatives say about welfare, after George Osborne’s budget swiped £13 billion from low and middle income families. But this time Iain Duncan Smith may be onto something. Over the weekend the Work and Pensions Secretary floated the idea of personal accounts for people to dip into when faced with loss of earnings. It is not something the left should dismiss out of hand, because it is already part of the answer when it comes to pensions.
For retirement the UK now has a three-part system, which is increasingly effective at preventing poverty and replacing past earnings. There are private pensions (heavily regulated and subsidised by the taxpayer), the state pension (earned through National Insurance contributions) and means-tested top-ups. Ongoing reforms are gradually reducing the place of means-testing and most retirement income will in future be funded by the two contributory systems, one private, one public.
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