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Pensions Will Be Someone Else's Problem
By Matt Keating, The Guardian
September 9, 2004
This week's resignation by Andrew Smith, the works and pensions minister, put Britain's pension crisis in sharp relief for commentators both on and off the business pages.
Whoever succeeds Mr Smith, said Alex Brummer in the Daily Mail, "will be forced to tackle one of the most complex jobs in government and an agenda that will affect the lives not just of today's workforce, but for those for generations to come."
The crisis will not be rectified by the pensions bill, reckoned the Financial Times. The new bill, which is still being debated in parliament, will create a new regulator and a protection fund for members of company schemes that have collapsed. But the issues tackled in the bill "are dwarfed by the wider crisis in pension provision, as Britain struggles to finance adequate retirement benefits for elderly people who are now living longer", it said. "The much-vaunted occupational pensions schemes face a funding gap of £54bn ... The value of the state pension has been eroded, driving many more means-tested benefits such as pension credits and weakening incentives to save for retirement."
The halving of share prices and "Gordon Brown's £5bn tax raid" had exacerbated the crisis, noted Patience Wheatcroft in the Times. "Savers in money-purchase schemes [have seen] their future pensions shrink by the week. Members of employee-guaranteed schemes whose companies went bust are worse off. What assets remained were often exhausted by paying pensions, leaving little or nothing to those yet to retire. The post-Maxwell 1995 Pension Act could not cope. And the Pension Protection Fund will be too little too late."
But the Independent's Jeremy Warner felt that the fault did not just lie with the Blair government. "The problem with the pensions timebomb is that by definition, it is a problem for the future, not the here and now," he argued. "This makes governments extraordinarily reluctant to address it in any meaningful way, as any such attempt is almost bound to involve an immediate cost in the form of higher taxes."
Warner reckoned Labour's failure to address the pension crisis earlier could be "explained only by its obsession with weapons of mass destruction and other imaginings with which to distract us from the really important things ...
Belatedly, No 10 has woken up and smelt the coffee."
Anthony Hilton, in the London Evening Standard, said it was the government that had created "an environment where it pays" for people to be "feckless" about retirement provision. "Under Mr Brown's system of credits and means-tested allowances, the state will provide the penniless with far more than a hard-working, responsible normal individual could hope to save by their own devices," said Hilton.
But judging from the evidence so far, countered Neil Collins in the Daily Telegraph, such reckless people should be wary. "[Mr Smith has] claimed that 2.5 million pension households were getting an average of £41.80 a week from the pensions credit," said Collins. "This is pure prestidigitation. Research from Age Concern found that more than half the 3 million people claiming the credit are actually getting less than £10 a week, and the average is a pitiful £9.63."
The Daily Mirror's Rosa Prince was angry with the private sector. "Big business is the real villain of the pensions crisis," she said. "For most companies, the answer to the [pension] shortfall has been to scrap final-salary schemes ... Yet most that axed [those] schemes for workers have kept them at boardroom level. Directors' pensions are worth on average £2.15m."
The Daily Mail's Brummer saw a possible solution in the crisis by making employee pension savings compulsory, as it is in Australia. "Yet ... mandatory saving in an employer's pension scheme would be seen as another stealth tax, even though it could be essential to keeping future retirement funds solvent," said Brummer. "The brave politician who bites this particular bullet will risk not only their own career but that of the whole of government. This was not a challenge Mr Smith was ready to take on. But there should be no mistaking the direction in which the nation is heading."
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