Private pensions are a publicly subsidised gift to the wealthy | Phillip Inman

Private pensions are a privilege for the lucky few and a curse for everyone else. Sold as a saviour for what would otherwise be a ruinous old age, they have become pernicious financial vehicles that allow an older generation to hoodwink younger generations, who also seek security in their latter years.

To make matters worse, saving by the better off is enhanced by state subsidies, widening the divide between rich and poor in retirement while driving a wedge between the generations.

As John Healey scours the public finances for ways to boost spending on defence, social care (and the rest) before the autumn budget, he should put considering equalising the tax break on pension savings top of his list.

Do standard-rate taxpayers know that they get half the subsidy for pension saving that higher-rate taxpayers receive? Probably not.

Official figures published last month show that the cost of income tax relief on pensions soared from £48bn in 2022-23 to £60bn in 2024-25, an increase of a quarter in just two years. About £40bn is swallowed up by higher-rate taxpayers. That’s because higher earners get a 40% tax break while everyone else gets 20%.

At the heart of the problem, and why Healey will find it difficult to confront, is the concept of retirement itself, the purpose of which has changed dramatically over the past 80 years.

Once a safety net for later life when workers and carers were too infirm or too ill to continue caring or working, it has become something that should involve three, four or five holidays a year, and last for 35 years or more. It’s why many of the people standing outside pubs on a Thursday evening – a ritual Westminster council would ban – are grey heads celebrating their early retirement, and a long one to boot.

Someone aged 60 in the UK will live, on average, to 84 and have a 33% chance of living to 90, according to the Office for National Statistics’ life expectancy calculator. And that predicted lifespan is longer the more affluent you are.

There is a growth industry among consultants who not only plan the finances of those who retire with big pension pots, but also design a life for those who were senior in some way in the latter part of their working life and feel lost without anything to do.

While many people will devote their retirement to charity work or looking after children, for too many living the retirement dream is to inhabit a comfortable cocoon. Why? Because those who have saved deserve another entire lifetime of R&R after so much hard graft, they say.

Of course, those people who have actually grafted tend to have meagre pension provision. White-collar workers, and especially those in management or aged over 50, have the best of it.

The scandal of baby boomers and gen Xers hoarding their pension savings can be seen in the industrial disputes of the 2010s, when almost every strike was called to defend the pensions of older workers.

Shop stewards, mostly over the age of 50, would negotiate deals with managers in a similar age bracket to secure guaranteed defined benefit pensions for themselves while younger workers and new joiners were offered the much cheaper, stock market-dependent defined contribution schemes.

Over time, these shop stewards and their contemporaries on both sides of the management divide have walked off into the sunset, taking their gold-plated pensions with them.

It is damaging to the economy when so many experienced and skilled workers prefer buying an even bigger SUV and a cruise ship holiday to finding a way to contribute into their old age, at least while they have their health. This is especially true in a society like the UK where, since Nigel Lawson’s reforms in the 1980s, pension provision is largely privatised.

Global studies of state pensions show they encourage workers to stay employed for longer, either because the payout is too low to sustain a decent standard of living, or because governments have “moved the goalposts” and delayed the state pension age.

However, as the state pension has faded into insignificance for many better-off workers, the incentive changes. A defined benefit scheme, more commonly referred to as a final salary pension, has a default retirement age of 60 and anyone who has accrued all their rights has little incentive to carry on.

Analysis by the Institute for Fiscal Studies shows that those people with the lowest and highest wealth are least likely to be in work aged 65; the lowest due mainly to ill health and a lack of skills, the better off because they have lucked out with their pensions.

Chief among the winners these days – those with guaranteed pensions linked to their salary rather than to the stock market – are public sector workers. They regularly attended retirement parties for colleagues who think it reasonable to retire at 60 after 35 years of office life with a pension lasting another 35, believing the failed economics of this outcome is someone else’s problem.

Professional baby boomers may have escaped with their winnings to live the high life, but Healey can stop gen Xers perpetrating the same heist. Of course there will be complaints. But the judges, doctors, marketing executives and company directors who will shout loudest should ask themselves why 40% of their pension pot should be provided by other taxpayers, most of whom are much poorer than they are.