The tax and benefit system is basically broken for couples with children

If you wanted to disincentivise work for the poorest, this is how you'd do it.

Last week, this IFS chart showing the effect of the child benefit withdrawal on marginal tax rates made quite an effect:

IFS Chart

I wrote about it myself, arguing that it underemphasised how bad the effect would be on families with lots of children. But the chart also plays down how bad the existing system is. The interplay between benefits, income tax and national insurance results in marginal tax rates which increase and decrease in a haphazard and unpredictable way, and frequently reach astronomic levels.

The IEA's Philip Booth looked at what he calls "the simplest possible case… of a couple with three children not claiming Housing Benefit, Council Tax Benefit or assistance with child-care costs (or a host of other ad hoc benefits that are available)." The figures were compiled in May last year, but are based on the state of affairs this May – so there may be some lags in exact amounts, but the overall picture remains accurate, at least pre-Universal Credit. Here they are charted in the same format as the IFS'

Chart Two

It's clear that for this case, the tax and benefit system is almost entirely backwards. The largest rates are paid at the bottom end of the income scale, progressively declining to 42 per cent, before finally, at the very top end, increasing to a "high" of 47 per cent.

And as Booth says, this is the simplest possible case. For someone in this situation claiming all the benefits they were entitled to, it's highly likely that at least one of the marginal rates would break 100 per cent – and that the tiny patch of 0 per cent at the very poorest end would disappear entirely.

While Bond and I agree on the problem, it's unlikely we would match minds on the solution. To me, the data above illustrates the fundamental folly of thinking that withdrawing benefits can ever really make economic sense. It is, prima facie, a strong argument for a Green-style citizen's income. Remove the conditionality from benefits and you have a system which encourages work at all income levels, rather than stamping on motivation the minute a family is no longer nominally "poor".

Raphaelle and Fabienne pose with one of their three children. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/