Newspaper article The Evening Standard (London, England)

At Last, a Blueprint for Pensions

Newspaper article The Evening Standard (London, England)

At Last, a Blueprint for Pensions

Article excerpt

LIVING longer means working longer and saving more. Until now successive governments have refused to acknowledge that hard truth.

Disclosure today of the millions to which senior civil servants - along with MPs - are entitled in pension provision will only reinforce public suspicion that generous personal arrangements for these individuals have distracted them from getting to grips with the crisis faced by the nation as a whole.

However, today's White Paper does, at long last, reflect these principles in adapting most of the recommendations of Lord Turner's pensions report, albeit with a further delay built in.

The proposed increase in the state pension age to 68 by 2050 goes some way towards paying for a more generous basic pension entitlement, achieved by linking pensions to the growth in earnings rather than inflation. Without this, most pensioners would end up reliant on means-tested benefits. The Prime Minister and his Pensions Secretary, John Hutton, have made clear in the tussle with the Chancellor that they believe his use of the pensions credit to support the elderly has gone too far and has the effect of discouraging some of those now at work from saving for their old age.

The White Paper also proposes a national savings scheme partly paid for by employers. This is a strong incentive, necessary to coax more people into saving, but the money has to come from somewhere.

Large employers appear to have accepted that they will have to shoulder much of the cost, but there is likely to be considerable resistance from small firms. Epic last-minute battles have raged between the Chancellor and the Prime Minister over how many smaller companies can expect a subsidy for this new expense, and for how long. These arguments are sure to continue.

Meanwhile, the cost to the taxpayer of creating the new schemes is still enormous - quite how big is not clear before knowing the extent of the subsidies or the exact date when the earnings link will be restored. The danger remains that the new national scheme will encourage employers to drop their own offerings in favour of something which is less generous. …

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