Flat pensions can help deliver social mobility

The flat tax debate is one that rears its ugly head every now and again but I don’t tend to hear about the considerably more persuasive and fairer ‘flat pension’ idea.
 
We currently have a collective pension obligation in the UK that is a ticking timebomb and, to add to the looming carnage, it is the public sector pension fund that the Government tends to borrow against to fund current spending. Further to this, an ageing population and the WW2 baby boomers nearing retirement age mean there is little doubt that the rather dry question of how we fund our post-work lives is a critical one.
 
Most pensions involve the employee paying in x% and the employer paying in y%, both x and y being in the region of 10. What you put in either attracts interests or, if you are very lucky, goes towards your final salary scheme, either of which you realise upon retirement with a lump sum and/or annual payments.
 
That is all well and good and should probably continue in the same form, particularly the employee contribution as what a person does with his/her salary is their business. However, a potential change could be that the employer contribution goes into one enormous public sector pot and, upon retirement, a flat annual salary (with an appropriate inflationary increase) is paid out across the board regardless of whether the drawee was the Head of the Civil Service or sweeped the streets. It is joyously inflexible, the inflexibility being the guarantee that fairness is realised in the system.
 
Note, of course, that those enjoying salaries in the range that the Head of the Civil Service enjoys will no doubt have separate pensions that can ensure a more luxurious lifestyle. However, crucially, no employer contribution will have funded such separate pensions. Note also that the above can just as easily apply to private companies.
 
As a country we believe in the universality of education, we believe in the universality of health provision so shouldn’t we also believe in the universality of adequate pensions? ‘The rat race is for rats’ said Jimmy Reid, who sadly passed away last week. I would add to that famous phrase that peanut pensions are for monkeys.
 
What if the employer contribution element of Fred Goodwin’s pension was to be spread more evenly? Or the top mandarins in the public sector? Or politicians for that matter? Who would shed a tear? Any employee, public or private, would still be welcome to inflate their pensions with their own salary, and that would still attract tax relief, but in terms of reducing the very top pensions and increasing the very lowest, even just a little bit, this ‘flat pensions’ idea seems to be the radical realignment our pensions problem requires.
 
They say you get out what you put in and while this is true in terms of effort and, more often than not, love, when the have-nots have nowt to put in, it’s little wonder that the haves continue to skim the financial cream from society’s efforts and the gap between rich and poor grows ever wider. After all, which box would this proposal not tick? Social mobility, progressive, a future fair for all, fair is worth fighting for, we’re all in this together?
 
It’s bulletproof but, sadly, it’s never going to happen. Greed will remain good in the UK for decades to come and too many people prefer their pensions to be fat rather than flat.
 
I remain optimistic that something can be achieved however. It would take a collective mental leap from the UK but it is a leap in the correct direction. For too long (and I blame Thatcher) it has been every person for themselves, getting yourself ahead, getting yourself on and measuring success and contentment in £ signs. Trample your way to the top.
 
A flat tax would cement that regressive thinking. A flat pension would reverse it.