Industry experts have called for more radical changes to the pensions system and tighter regulation of defined benefit (DB) pension transfers, amid concerns that the current system disproportionately benefits the wealthy.

Speaking at the International Longevity Centre’s Retirement Income Summit, The Financial Inclusion Centre founder and co-director, Mick McAteer, suggested making changes to “the crazy pensions taxation system, which disproportionately benefits the wealthy and subsidises an inefficient pensions industry”.

In the same session, Key Group chairman, Steve Groves, argued that a new government must seize “a once in a generation opportunity to look at who we tax and how we tax them”, by “shifting some of that tax burden from income to wealth, rather than tax fewer and fewer working people, many of whom are working poor”.

In particular, Groves said a new government needed to address the dependency ratio between the working population and retirees.

He also suggested that stimulating more saving among workers and increased economic growth will both help, as will investing in improving efficiency in the NHS and the efficacy of preventative healthcare, including through use of AI and other new technologies.

But he argued the time had come to tax wealth to a greater extent.

“There is enough money out there – but we’re taxing it wrongly,” Groves said. “My view is that we need to start shifting some of that tax burden from income to wealth, rather than tax fewer and fewer working people, many of whom are working poor.”

Making an assumption that Labour will win the forthcoming election, Groves suggested a Labour administration could withstand any backlash to wealth tax proposals, as such changes would be unlikely to have much impact on most of the people who voted for a Labour government.

Given this, he urged an incoming opportunity to seize this “once in a generation opportunity to look at who we tax and how we tax them”.

Like Groves, McAteer suggested the use of redistribution of wealth via the tax system to address the growing problems of pensioner poverty caused by flaws in the pensions system and related issues such as the dysfunctional housing market.

“Everyone has bought into the myth that there is no money – there is plenty of money around if we want to redistribute that money to ensure fair pensions for all,” McAteer said.

He also drew attention to what he said were serious problems caused by the freedom and choice reforms, including increased vulnerability of some people to scams, or to long-term financial vulnerability if they chose to transfer out of DB pension arrangements.

“One of the bigger scandals we’re about to face is the DB pensions transfer market,” said McAteer.

He suggested that the Solvency UK regime and the “financial conjuring trick” of the matching adjustment incorporated within it, allows UK insurers to look more strongly capitalised than they actually are. He pointed out that just four companies account for 75 per cent of the DB transfer market.

“I genuinely fear that in the coming five years we are facing a new Equitable Life scandal over the DB pensions transfer industry,” said McAteer. “We’ve got to address weaknesses in the regulatory system.”

However, he was also convinced the changes he would like to see were very unlikely to come to pass, because “all the main political parties are pushing for a bigger role for private finance in … funding public policy goals”, which he claimed would ultimately make public services more expensive, for the sake of taking these costs off the government’s balance sheet.

“That’s because everyone has bought into this false narrative that there’s no money left,” he said.

“I have never ever seen both main political parties promoting the interests of the City of London in the way we’re seeing at the moment. Anybody who wants to fight for decent pensions reform is going to have to fight very hard to get the attention of the next government.”

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