I never thought I would get interested in pensions. But in fact the pensions crisis that the UK now faces is something that has to concern everyone, me included – and not just out of personal interest, but in interest of the county.
We’re all living longer, and drawing our state pensions for many more years. Meanwhile, a falling proportion of the population is in work and able to contribute towards those pensions. Growing numbers of older people mean a smaller proportion in work: and at the same time, people are spending longer in education (the government is about to make kids stay in school until 17), kicking about the world on gap years, doing MBAs and the like. So everyone in work has to carry more dependents.
But it gets worse. We used to have a good that laid golden pension eggs – the so-called occupational pension system, work-based savings schemes run by employers. Sadly, over-regulation by Gordon Brown has killed that goose. The UK used to have pension savings larger than all the rest of Europe’s. But in the last few years, thousands of employer schemes have closed down. Thanks, Gordon.
What do we have instead? Daft schemes and lots of them – like Stakeholder Pensions, the Personal Account, and the Savings Gateway. All trying to get lower-income people to save for their retirement. Nobody bothers to mention that when they do, they will just lose their means-tested benefits, of course. They might as well spend it on beer now than lose it to the benefits office when they retire.
What we need to do, as expert Alan Pickering said in an ASI report years ago, is raise the pension age and index it to life expectancy – and use the money saved to raise the basic state pension so that nobody in retirement needs to rely on means-tested benefits. So when people do save something of their own, they get to keep it, instead of simply losing state benefits.
All that’s needed is a bit of political vision and boldness. Oh well, see you in the workhouse.