PENSIONS REPORT: LATERLIFE SUMS UP
The publication of the first part of the Pensions Commission
report by Adair Turner has received wide comment from the media. And
so it should: our future prosperity is at stake.
As has been known for some time, we have a looming problem: an
ageing population, state pension in decline, too few people saving
for their old age. And the recent failures of various private
pension schemes have offered even less reason to save.
The predictions are not good. Without some kind of pension reform,
many people will be living in poverty in later life. With 12 million
people not saving enough for their retirement, we could be seeing
this happen in about ten years time, and almost certainly in twenty
years time.
The new report advocates that we:
• Take later retirement
• Pay higher taxes
• Put more money into private pensions
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Means testing is confusing and inefficient:
The report criticised the complexity of means testing for
pensioners. Many MPs want to abolish this. But there’s an argument
that means testing actually helps the poorest pensioners, ensuring
that they receive more money than the better-off. If your thinking
tends to the ‘undeserving poor’ viewpoint, you could object to this.
But many poor pensioners are women or those on wages too low for
them to save. If, as the report hints, it might call for compulsory
saving in the final part of the report, due next year, then surely
there must be some kind of means testing for this.
What the unions want:
Compulsory contributions from employers, the link between
earnings and the state pension to be restored, employees to pay into
schemes at about half the rate of employers. And a rise in state
pensions.
How do other countries manage the pension issue?
In Australia, a country that reformed its pension policy twelve
years ago, there are compulsory employer contributions, tax
incentives for employees who join company schemes, tax concessions
for the self-employed to encourage them to join schemes too. In the
US, there are major tax incentives to save for pensions, higher
earners supporting lower earners, but very very few of the social
services that we have in the UK.
Help the Aged is severely critical of the Government:
A statement from Help the Aged reads: ‘The interim report of the
Pensions Commission is a damning critique of how we have all put
pensions on the back burner, and tells a worrying tale of the likely
consequences of this neglect .
‘Governments, employers and individuals have all neglected pensions
and sought to pin the responsibility on others. But all will have to
take action if the problems identified by Adair Turner's team are to
be addressed…The alternative is a growing population of unhappy
pensioners surviving at subsistence levels, complaining about their
dashed expectations of retirement, and sustained by an escalating
bill for means-tested benefits.’
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