Preparing for an uncertain future

Published on 1st February 2008

Avoiding a future pensions nightmare

Secretary of State for Work and Pensions Peter Hain, has recently highlighted the take personal responsibility for your pension need for individuals to take personal responsibility by saving for later life. Hain said this is necessary as part of a renewed social contract designed to avoid the nightmare of a pensions crisis in years to come, and that action is vital to ensure that future generations of workers are not left struggling to pay for an ageing population.

The second reading of the Pensions Bill 2007 in the House of Commons last month proposed automatic enrolment from 2012 into good workplace pensions with an employer contribution of at least three percent. New proposals are set to make it simpler and fairer for women and carers to build up a State Pension by recognising social contributions, making the State Pension more generous by restoring the link to earnings, and increasing the State Pension Age to ensure that these changes are affordable.

Within the wider reform package, measures to encourage occupational pension saving are also proposed. The 2004 Pensions Act created The Pensions Regulator and the Pensions Protection Fund to provide greater protection for members of occupational schemes. Now the government is considering how the functions of these organisations and other bodies involved in the regulation of occupational pensions, such as the FSA, fit with their reform proposals and with wider developments in the pensions market, undertaking an independent institutional review.

With increasing longevity, if we don’t tackle the challenge of under-saving, by around 2050 we face the nightmare of a pensions crisis with people of working age struggling to pay for an ageing population. Peter Hain, Secretary of State for Work and Pensions

Peter Hain says the Pensions Act 2007 puts the first part of this new settlement in place - providing a solid foundation for private saving by extending coverage from 2010 and restoring the earnings link to the Basic State Pension in 2012, or by the end of the next Parliament. The State Pension age is also set to increase gradually to 68 by 2046 so that future generations are not left footing the bill for increasing longevity.

The new Bill is expected to build on these reforms by making it easier for people to save through automatic enrolment into a qualifying workplace pension scheme, including the new personal accounts scheme.