PPI warns of serious crisis in UK pensions

UK – The UK state pension system has come under fire from the Pensions Policy Institute research organisation, which warns that “a serious crisis is looming”.

A new PPI report, “The Pensions Landscape”, highlights the problems in the state pension system that are building up for the future, and calls for an immediate debate on the issue.

Government policy assumes individuals will do more to save towards their income in retirement, but the research could not identify signs that future pensioners will be better off than today’s pensioners. “The responsibilities of the state, employers and indeed individuals still remain largely undefined.”

“The reality is many people are unable – or unsure of how – to act,” says the PPI.

One reason given as to why “pensioner poverty” is still in danger of hitting the UK is that both state and employers are reducing their long-term pension commitments. Although today’s average pensioner is better off than his or her forebear, employers are reducing the amount contributed.

At the same time, state pension income per pensioner is set to fall relative to earnings. The third pillar system provides little relief either as total contributions to private pensions have stalled, says the report, and most people do not have non-pension savings or investments.

In response to the report, David Willets, the opposition Conservatives’ spokesman for work and pensions, criticised the government for failing to address the issue of state pensions in its reform green paper published last December. “People can no longer expect retirement income to increase in future years. This is a powerful warning that the government must not ignore.”

The PPI is calling for a debate, and says: “Even though the average pensioner income may not worsen in the short-term, the long-term issues require a new solution to be debated now. The debate should start where the problems lie – with the structure of state pensions. In an ageing society, what state pensions do we want and how much are we prepared to pay for it?”