"The crisis in funded pensions grows more serious as every week passes. The latest and most wide ranging survey by the Association of Consulting Actuaries shows that fewer than four in ten of our private sector final salary schemes are still open to new members, and half of those are contemplating closure.
Everybody recognises that we face a crisis, apart from the Government which is still insisting that the structure of pensions is ‘basically right’. It justifies this by claiming that we are saving £86bn a year on our pensions. But this figure is a massive over-estimate. The truth is that this year British households will be saving 3.75% of their incomes, the lowest level since records began. The value of the assets in our pension funds is falling; the proportion of recently retired pensioners with occupational pensions declined from 67% to 59% between 1997/8 and 2001; and the proportion of workers without a funded pension has risen from 40% to 44% in the last two years.
One of the reasons why the Government is so keen to deny that there is a problem is that it would involve admitting the disastrous effects of their £5 billion a year tax on our pension funds. At the time Tony Blair defended it because he said that the stock market was rising, but now, contrary to his assertions at Prime Minister’s Questions, the stock market is lower than it was when the pensions tax was imposed. If the bull market was a justification for the tax, then that justification has gone.
We need a response based on the following
reforming the requirement that people buy annuities at the age of 75;
easing the impact of the new accountancy standard, FRS17;
radically reducing the burden of regulation on occupational pensions;
reversing the spread of means-testing by putting the cost of the Pension Credit into a higher rate pension for older pensioners."