A thinktank linked to rightwing populist party Reform UK has proposed 'lifetime investment accounts' seeded by the government with £1,000 "at birth". The Centre for a Better Britain also suggests closing all public sector pension schemes to new entrants and means-testing the state pension, while keeping 'accruals' unchanged. 

The report authored by the organisation's head of policy, James Mackenzie Smith, proposes a new form of investment account as an accumulation vehicle for later life. 

Modelled on Australia's superannuation system and the 'Trump accounts' launched in the US this summer, the proposed investment accounts would be seeded with £1,000 by the state "at birth", implying that people need to be born in the UK to receive the money. The money would be invested in a default fund chosen by the state until the account holder is 18.

Contributions to the portable auto-enrolment accounts would be increased by 0.5 percentage points a year to at least 15% of earnings, with a longer-term target of 20%. Contributions would apply from the first pound of earnings and there would be no opt-out. The self-employed would be auto-enrolled via self-assessment. 

Forcing all workers to save up to a fifth of earnings with no access would have a significant impact on low earners in particular. The report states: "We recognise the trade-off between adequate retirement outcomes and low earners contributing 15-20% of their salaries; with this in mind, we recommend graduating the contribution rate."

National insurance would also be cut “in lockstep" with the phasing up of auto-enrolment.

These accounts would not be accessible until retirement except in "strictly" limited circumstances, such as serious illness, “sustained involuntary unemployment beyond a defined duration” or "severe financial distress, as defined under a statutory hardship test". 

The report author leaves it open whether such lifetime accounts should be available for the purchase of a first home, saying this was "a point of debate within the working groups". The paper notes that home ownership increases retirement security but adds early access would sacrifice compounding and inflate house prices.

In 2023, the former Conservative government called for evidence on a 'lifetime provider model' similar to Australia's, where employers would be required to pay pension contributions to the preferred provider of each individual employee. The pensions industry widely regarded the proposals as a distraction amid a slew of other pension reforms. 

The idea that the state should kickstart savings at birth also harks back to the 2002-11 child trust funds brought in under Labour, although these became accessible from the age of 18, which the thinktank argues was their main flaw.

The report proposes closing the funded Local Government Pension Scheme as well as unfunded public sector schemes to new entrants. 

Mackenzie Smith claims that "the LGPS and unfunded public-sector pension schemes risk creating unsustainable liabilities for future taxpayers and crowding out spending on frontline public services. They should be closed to new entrants, with future public-sector workers joining the Lifetime Investment Account system, while pensionable pay should be capped for higher earners to limit further accumulation of taxpayer liabilities."  

Reform's deputy leader Richard Tice previously said Reform would close the LGPS and turn it into a sovereign wealth fund.  

Public sector schemes include those for the army, police, firefighters, nurses and doctors, teachers, and civil servants, as well as local government workers. The thinktank's report does not say how a government closing these schemes would deal with possible strike action and its impact on patients and pupils among others.

Last year, Reform's leader Nigel Farage refused to commit to the triple lock and said it was unaffordable, but the party has since softened its stance. This is perhaps unsurprising given its voter base tends to be found in the age group from 55 upwards; a third of people over 60 would have voted Reform in June, along with nearly a third of 50 to 59-year-olds, according to Statista. 

The latest state pension proposals by the Centre for a Better Britain suggest the thinktank is attempting to keep the Reform voter base on side while promising to cut back the UK's expenditure on old age benefits by saying the state pension should "gradually move towards an Australian-style, non-contributory, means-tested safety net, while preserving all existing state pension accruals". 

The report said the triple lock should remain in place but be capped at the increase in the working age tax-take. 

However, under Mackenzie Smith's plan, there would be little security in old age for younger people as the benefit would become means-tested with a 'floor' that would be uprated with inflation and earnings only. In Australia, means-tested state pensions have been blamed for distorting the property market, as the principal home is exempt from the government's assets test. 

Labour party chair Bridget Phillipson responded to the report saying: “These plans, commissioned by Farage’s deputy Richard Tice, would see Reform UK come for your pension, while offering tax cuts for the richest and cuts to public services for everyone else."  

Calling on Reform to rule out the plans, the MP for Houghton and Sunderland South added that "pensioners will rightly question what proposals like these could mean for them and their family”. 

Reform UK currently has eight MPs, as well as outright majorities in 23 councils and being the largest party in a further 12 councils. It recently received £36m each from crypto billionaires Christopher Harborne and Ben Delo. The donations were made after a video was broadcast on Channel 4 which showed senior Reform aides apparently discussing how to evade electoral law about foreign donors. The Metropolitan Police have reportedly added this incident to an ongoing investigation into donations to the party.