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Should the state pension be means tested?

Journalist: Marc Shoffman, Freelance

ended 17. January 2025

Conservative leader Kemi Badenoch has suggested that she would cut the cost of the triple lock by means testing the state pension.

I am seeking views for a MoneyWeek article on if this would be a good idea. How would it impact pensioners? Would it encourage people to save more privately or what are the unintended consequences? Does it make issues such as national insurance payments and retirement saving more complicated?

Kind regards, Marc

3 responses from the Newspage community

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Editor
Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
If it were means-tested, then the whole position around National Insurance and what this goes towards paying for would need to be repositioned.

It used to be the case that those who earnt a certain amount built up extra state pension entitlement through the State Second Pension / SERPS. As it is, this is no longer the case and there are those who pay a lot more in national insurance but get the same state pension as someone paying the minimum. If they now got no or even less state pension, this would perhaps create even more resentment towards them paying it.

It may mean that National Insurance rates should drop further, and it will also be important for people to review their financial plans to factor in what having no state pension means. For a couple today, that's around £23,000 a year of tax free income they will miss out on which can have a big impact.
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Editor
Scott Gallacher
Director at Rowley Turton
Kemi Badenoch's suggestion to means-test the triple lock is a major political misstep, comparable to Theresa May's infamous 'dementia tax' proposal.

While the affordability of the triple lock certainly warrants review, the state pension remains a vital universal foundation of retirement planning. Turning any part of it into a means-tested benefit risks eroding public trust and long-term support. It’s also worth noting that the state pension is already effectively means-tested, as wealthier retirees repay up to 45% of it through Income Tax.

Undermining its universality would not only make the system more complex—impacting national insurance contributions and retirement savings—but could also discourage private savings, as people fear being penalized for building their own financial security. The state pension's simplicity and fairness are its greatest assets. To tamper with that would be short-sighted and deeply damaging.
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Joshua Gerstler
Chartered Financial Planner & Wealth Manager at The Orchard Practice
In the long run yes. In the short term, it would be unfair on people who have planned a retirement which includes the State Pension, to take this away from them. But in the long run, the State Pension should only go to those that really need it. If, when you start your working life, you know that the onus is on you to take responsibility and save/invest for your retirement, then you have 30-40 years to make it happen. Only those that have not been able to do so, rather than those who have not chosen to do so, should receive help from the state.