There is no substitute for the state
All too often a political system
that encourages parties to focus on securing victory in brief, five yearly
intervals, inevitably leads to policies based on short-termism.
Seldom does any minister declare
that he or she has an eye on the bigger picture.
Under such circumstances, why
should politicians worry about the effects of decisions taken today, when
the likelihood is that some other party will be in power and have to deal
with the problem when the policy of the current regime starts to unravel
at some point in the future?
Regrettably, nowhere is this lack
of political vision more apparent than in the malaise surrounding the
issue of pensions and the challenge of how society can best provide
financially for its members' retirement both now and, just as importantly,
in 15 to 50 years' time.
It is widely accepted in
The response to such developments
- such as the proposals to raise the age at which people can draw their
state or company pensions, hidden behind the call for equal opportunities
- are evidence of the short-termist, knee-jerk approach that suffocates
the development of a coherent pensions policy.
Putting faith in the private
sector to assume the main responsibility for pension provision over the
coming decades, as advocated by the government, is the kind of policy that
will come back to haunt us - not the ministers who encourage it, who will
have since shuffled off the political stage but the workers who retire in
30 years' time only to find they were conned.
Remember the previous Conservative
administration's hyperbole in persuading millions to opt out of the state
earnings related pension scheme (Serps), only for it to be revealed years
later that those individuals would have received higher payouts if only
they had left their money in the state scheme?
It would be an act of intellectual
immorality if such a mistake were to be repeated.
Recent events have also proved
where the weakness in the government's current pension policy lies. The
private pensions industry has been dogged by corruption, scandal and
mismanagement on a global scale and the fall in the stock market has wiped
millions from pension values.
Even the solid rock of
occupational pensions, which successive governments have relied on to
enable them to devalue the basic state pension, has now been hit by a
Every week another well known
company closes its final salary pension scheme in favour of a more risky
and less generous alternative.
Evidence also suggests that the
US-style insurance scheme to safeguard pensions when firms go bust,
currently being floated by the British government, is likely to fail. The
pensioners of tomorrow are being forced to put their retirement into a
system based on the high cost, high risk principles of the casino.
Based on the continued pursuit of
the government's existing pensions policy, what little retirement the next
generation of pensioners will have will be spent subsisting on
Already the government is
extending means testing to half of all existing pensioners, through the
introduction of the extremely complicated pension credit.
It will be ineffective at getting
money to those who need it most, expensive to administer and turn the
stigma of means testing into a purported virtue.
Even a leading member of the
government's pensions advisory group has warned that as a result means
testing will become "a majority sport".
The policy will undermine the very
thing that can offer a solution to the pensions crisis and provide real
financial security for generations to come.
The state pension, despite its
current inadequate level and the need to widen its entitlement, still
offers the most effective way for society to provide for its collective
The pay-as-you-go national
insurance system enshrines the co-dependence between the generations and,
unlike the private pensions industry, it works.
Of course, for many of today's
pensioners time is a luxury they cannot afford. That is why an immediate
£25 a week increase for every one of them is needed, along with a
commitment to bring future increases in line with earnings. Additional
non-means tested help for the over-80s and many women pensioners without
full contributions are also essential.
Just as important is the need to
start the debate about how the state pension system can be reinvigorated
so that it provides a decent income in retirement that people can live on,
set at least at one-third male average earnings.
In the meantime, with the general
election now less than two years away, some MPs would do well to remember
the 11m pensioner votes if they wish to keep their own generous pensions.