Do you share my concern at the way in which Final Salary Pension Schemes are being closed to new members and now in some cases to existing members? These are schemes which have helped so many of today’s pensioners to enjoy a comfortable retirement. Companies in a recession may see closure as a quick way of showing they are keen to cut costs and we can understand that. But it is time it was realised that future living standards for the retired will fall, unless action is taken. Since there is little sign of working age people increasing their saving for retirement and employers are ducking for cover, the future is likely to be employees and companies paying for decent living standards for the retired through higher taxes.
The Government has no stature in discussions with employers about how to fashion a way forward for Occupational Pensions, because Gordon Brown’s 1998 Pensions Raid ending the dividend tax credit took £5 billion per annum out of Pension Schemes. Having plundered the Pension Funds himself, he can hardly take the high ground now and his poor stewardship of the nation’s finances has led to Britain’s weak position in the current recession.
His Party was also involved in rubbishing the idea of a funded national state pension scheme with money set aside and invested to help pay future pensions at a higher rate, rather than solely relying on today’s workers’ national insurance payments to pay today’s state pensions (Pay As You Go). This idea was supported by Conservatives and enlightened Labour thinkers such as Frank Field. In Canada the Canada Pension Plan has money set aside to pay for future pensions.
We are all pinning our hopes on better up-rating of the state pension in line with earnings, reform of the State Second Pension and the new Personal Accounts, but I believe we will come back to two issues. We need to look at ways of making Occupational Pension Schemes fairer for employers, but without employees losing the security of a pension which gives a defined benefit and we need to look again at the idea of setting aside an investment fund to pay for better future state pensions.