Delivering the inaugural Pensions Management Institute annual lecture yesterday evening, Johnson noted that a “remarkable transformation” in pensions policy had, on average, made pensioners wealthier than people of working age.
This has partly been achieved by the triple lock, which increases pensions by whichever is highest of earnings, inflation or 2.5%.
Johnson cited Office for Budget Responsibility estimates that show the triple lock would add more than 1% of national income to pension spending by the middle of the century, relative to the cost of earnings indexation.
He also said the policy had introduced a bizarre degree of randomness to the future level of state pensions, which will depend not on overall increases in prices but on the timing of those rises.
Johnson said: “We have achieved an astonishing turnaround in the income of pensioners over the last three decades, without increasing public spending to levels seen in many other continental European countries.
“But the longer term future looks very uncertain. Those now in their 20s, 30s and 40s may well end up with lower incomes in retirement than their parents. The focus for policy needs to be on getting private provision right, with more risk sharing, and a rational and stable tax policy.”
As well as scrapping the triple lock, continued rises to state pension age were vital to making the pensions system more sustainable, he argued.
And, with increasing numbers of people now reliant on defined contribution pensions, some way of sharing and socialising risk was needed.
There is also a strong case for moving all defined benefit pensions, both those preserved and in payment, to indexation in line with the Consumer Price Index measure of inflation rather than the Retail Price Index, which Johnson said was now discredited.
