The vast majority of people in the UK do not have enough pension provision to fund the sort of lifestyle they would wish to lead in retirement, according to a new paper published by the Institute of Directors.
The IoD’s paper, “Crisis? What crisis? Pension policy in the UK” forms the basis of the business organisation’s responses to the Government’s consultations on pension provision.
With an estimated £27bn shortfall between what people have saved and what they expect to live on in retirement, the UK is chronically "under pensioned", a fact that Ruth Lea, Head of the Policy Unit at the IoD, the UK, accuses the government of ignoring.
"We doubt the government recognises the scale of the problem, we doubt if they recognise that there is indeed a pensions crisis," she said.
The IoD blames the crisis on inadequate savings, falling stock markets and lower rates of return based on the fact that people are living longer. As a result, the pensions look increasingly unaffordable for many people.
The government’s decision in 1997 to remove tax credits on share dividends should be reversed, the IoD says.
But the IoD rejected demands from many quarters that employers should be forced to make contributions into employee pension schemes – currently, all organisations employing more than four employees must offer access to a scheme but are not compelled to contribute. The introduction of compulsion would represent an addition cost burden to business, the IoD argued, and could lead to companies that currently make contributions deciding to reduce these to a minimum. Neither would raising the retirement age solve the crisis.
“We broadly welcomed the measures in both the Department for Work and Pension’s Green Paper on pensions” said Ruth Lea, “ though we had some serious reservations about, for example, the proposed contribution limits. But these consultations are barely scratching the surface of the pension problem. In particular, they do nothing to improve incentives to save in pension schemes for employers and/or employees and they do little to remove the existing disincentives to save.”
Union leaders attacked the IoD’s position. Simpson, Joint General Secretary of trade union Amicus, described it as “the economics of the madhouse." Earlier this week, his colleague Roger Lyons attacked what he called “the immoral trend amongst employers to transfer their responsibilities for occupational pension schemes offered as part of the employment package on to the individual.”
“At a time when the Government is concerned with the well being of the people of Iraq they must not forget the people at home who are growing increasingly angry that they will face a grim retirement through no fault of their own”, said Lyons.