Find all of the pieces from Prospect’s recent pensions supplement here
The realisation is taking hold that, like most developed nations, Britain faces a steadily mounting challenge over the next few decades to meet the retirement needs and expectations of its aging population. The state pension age is being equalised for women and men, and pushed up to reflect increasing longevity; millions of employees are being brought into workplace pension schemes to ensure they have more than just the basic state hand-out when they retire; the market for financial advice is being re-examined and free “guidance” made widely available.
But in spite of this growing tempo of political activity, the biggest question remains unanswered: can Britain pay its pensions bill? At a recent roundtable discussion in association with Old Mutual Wealth, Prospect convened a group of pension experts and policymakers to discuss whether and how Britain can tackle the pressing affordability issue.
Not surprisingly, the coalition’s imposition of a so-called Triple Lock in 2010, which will run at least until 2020, loomed large in the discussion. This dictates that the state pension will rise each year by a minimum of 2.5 per cent (unless prices or average earnings are rising faster, in which case it will track whichever is going up the most that year). In a period when both earnings growth and inflation are well below 2.5 per cent, the apparent generosity of this policy towards pensioners is provoking growing political controversy as their relative prosperity on various measures rises while many working-age groups stagnate.
There was also general agreement among the speakers that if maintained it would simply increase the affordability problem. “Arguably the triple lock is making a system that we knew wasn’t really working into one that’s even worse,” said Craig MacKinlay, a Conservative MP who sits on the Work and Pensions Select Committee.
However, data also show that as recently as 1989, around 40 per cent of…