The UK should begin laying the foundations of a universal, fully funded state pension to secure retirement incomes and create a permanent pool of national investment capital, according to a new report.
‘The Trillion Pound Question’, a report from think tank The Purposeful Company, warns that the triple lock is becoming increasingly costly due to the UK’s ageing population and the volatility of inflation. Governments will face pressure to abandon it as longevity rises, the report states.
The authors argue that this creates an opportunity to recast the “intergenerational social contract”. They call for the creation of a British Pension Plan – a bond-backed vehicle that would, over time, replace the triple lock with a fully funded model for the state pension and public sector unfunded schemes such as those for teachers and NHS staff.
The report says this would insulate the state pension from budgetary pressures, strengthen the public balance sheet, and establish a strategic investor in UK assets.
“There is a growing financial and social imperative to create a universal state pension fully funded through diversified investments in government securities, equity, bonds, and private assets.”
From ‘The Trillion Pound Question’, by The Purposeful Company
The Purposeful Company’s report supported the government’s plans to consolidate defined contribution (DC) pension schemes into “megafunds” of at least £25bn, but called for policymakers to go further.
The paper states: “There is a growing financial and social imperative… to create a universal state pension fully funded through diversified investments in government securities, equity, bonds, and private assets, acquired through contributions, borrowing, or both… When implemented, the proposed British Pension Plan would ensure that every child born from its creation would have a secure pension.”
The proposed fund could be initiated through borrowing of up to £100bn, the report suggested, with the money raised used to invest in “diverse assets”. If this portfolio achieved a 7% annualised return, it could double in size every decade “so that by 2100 it would be able to pay today’s state pension in real terms from its accumulated funds”.
Data from the Office for Budget Responsibility (OBR) shows that spending on the state pension was equivalent to approximately 5% of GDP in the 2024-25 financial year. The latest estimate for total unfunded public sector pension liabilities was £1.4trn at the end of the 2022-23 financial year, according to the Treasury’s most recent Whole of Government Accounts publication.
Reforms proposed to boost VC investment
The Purposeful Company’s report further proposed an independent investment board, free from political interference and able to pay “market rates” to attract and retain talent.
Alongside the state pension proposal, the report calls for a “fundamental reset” in how the UK mobilises its pension savings to fuel growth. Its other recommendations include reforms to ISAs and pensions to make it easier and more attractive for retail investors to back British companies, cuts to stamp duty on shares, and strengthening equity research coverage to revive retail confidence in UK markets.
Will Hutton, report co-author and co-chair of The Purposeful Company, said: “British pensions are missing in action. Our savings should be building the companies of tomorrow – not sitting idle while jobs, innovation and wealth flow overseas.”
Saul Klein, co-founder and executive chair of venture capital firm Phoenix Court, said: “When scaling tech companies succeed, 80% of the upside flows overseas to fund pensions abroad. UK pension funds and institutions must get behind the innovative UK businesses that are creating jobs, driving productivity and powering the country’s future.”
Additional reporting by Nick Reeve.
