More than 12 million working people are not saving enough for their retirement, a major report into pensions has found.The Pensions Commission said a mix of higher taxes, more saving and a higher average retirement age was needed to solve the UK's pensions crisis.
If taxes, savings or retirement ages were not increased, pensioners would suffer a 30% decline in relative incomes, the report said.
At 58, these issues probably weigh more on my mind than the average blogger. Some of the problems however are down to Thatcher and her government, who forced local government pension managers to stop contributing to their pension funds and encouraged private sector managers to take contributions holidays too. I don't know the full final effect, but the policy was still lunacy. The whole point of a pension fund is to smooth out variations in investment returns. If you stop paying in when times are good, the consequences are not difficult to work out. I've said it before, but it bears repeating - when I entered the pension scheme in 1971, my contribution was around 6% and that was matched by the employer. By now the employer contribution has reached 15% in many cases, but without equivalent increases by employees.
I suppose 20 years ago I wouldn't have been very keen on increasing my contribution level. That doesn't mean I would have been right. As far as I can see the pensions crisis is the outcome of a mixture of short sightedness and mis-management. The consequences for those looking towards their pension are dreadful. I know I'm lucky that my pension is a defined benefit scheme - those on defined contribution schemes face a huge gamble. Pensions are in many ways deferred earnings. For many people it is possible that they would have done better by keeping their contributions in the building society.
