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Willetts attacks pension spending forecast By
Nicholas Timmins Official
projections that the UK will continue to spend only about 5 per cent of
its gross domestic product on state pensions over the next 50 years are
"simply incredible",the Conservatives' pension spokesman warned. David Willetts said
the UK's low projections of spending on state pensions led many analysts
to conclude that unlike much of Europe, the UK does not face a
"demographic time bomb" over state pension spending. In many other
European countries, public spending on pensions is projected to run at 10
to 15 per cent of GDP. But the UK figure is no longer credible, he said. "When Margaret
Thatcher broke the link between pensions and earnings in the early 1980s
that policy was coupled with the encouragement of funded pensions,"
said Mr Willetts. "You can only
have modest levels of state expenditure on pension benefits if you have
healthy and widespread funded pensions. "The crisis in
our funded pensions means millions of people will be retiring on incomes
way below the level that workers are earning, and that is simply an
unsustainable position. "Unless we take
urgent action to rebuild our funded pension saving there will be enormous,
and indeed irresistible, pressure for higher state benefits for
pensioners. "Already the
IMF and others have begun to question the credibility of the government's
projection that in the long term, state pension spending will be held at
roughly where it is now - around 5 per cent of GDP. "That is much
lower than in any other European country and indeed almost any other
country in the developed world. It is simply not credible unless we do far
more to build up funded pension saving in the private sector." Raising state
pension age - which would help contain the bill - would not help, Mr
Willetts said, unless continued work and private pension saving plugged
the gap. "Unless people are able to work on, and we stop
wasting the talent we currently lose from people being forced to retire in
the fifties or early sixties, the gap will simply have to be plugged by
paying out more means-tested or disability benefits, which would really
only be additional pension spending in disguise." Copyright
© 2002 Global Action on Aging
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