UK pension system 'inadequate and getting worse'

Jul 10 2003 by Brian Amble Print This Article

Further confirmation, if it was needed, of the growing crisis in the UK state pensions system has come from a report by a leading pensions think tank calling for urgent reform to keep pensioners out of poverty.

The independent Pensions Policy Institute (PPI) says in its report, 'A Guide To State Pension Reform', that the state pension system is inadequate and getting worse and that it could not identify any signs that future pensioners will be any better off than today’s.

“Reforming state pensions is the most important step in solving the growing discontent with our pensions system," said Alison O'Connell, director of the PPI. "State pension benefits are the only income the poorest sector of the population will have to live on in retirement,"

"But the state system is widely criticised for being complex and inadequate. It is widely thought that the policies underlying the system are unsustainable. And private pensions only stand a chance of flourishing if they can be placed on a secure foundation."

Reiterating the analysis released recently by market analyst Datamonitor, the PPI says that the UK has an uncomfortably high number of pensioners in poverty and that without major reform, UK state pensions will become less adequate. Not only does the UK currently spend less than most other countries on state pensions, it says, but the forecast of future spending is likely to prove unrealistically low and socially unacceptable.

The PPI adds that the pension system has become separated from the significantly improved capacity for longer working lives and that it works particularly badly for some groups, especially women. The pension system is too complicated, it claims, and the combination of low price-indexed state pensions and extensive means-tested benefits means that the UK state pension system disadvantages people as they grow old.

Earlier this week, a report from the Economic and Social Research Council warned that only a radical rethink of the pensions system and the adoption of a universal citizen's pension could ensure that women's unpaid family work does not lead to poverty and dependency in later life.

The PPI echoes the idea of a citizen's pension, suggesting that it would be based on citizenship or residency criteria rather than on contributions built up during an individual's working life. Another option would be getting rid of the means-tested State Second Pension altogether and raising the level of the basic state pension so that there is less means testing.

Calling for an open and fact-based debate , the PPI says that a major programme of work is needed to move state pensions policy forward in the most positive way. "A clear sense of where the reform is heading needs to be balanced with ideas for how to get there," the report states, adding that "there are no ‘off the shelf’ solutions available from other countries."