Think-tank challenges pensions assumptions

Business-led think-tank Tomorrow’s Company will submit a report to the Pensions Commission this week that challenges conventional assumptions about the need for tax increases to pay for state pensions.

It says the ‘old age dependency ratio’ – the number of people aged over 65 to those under 16 – is being given undue significance, reported the Financial Times.

It says polcymakers should, instead, consider the ratio between the number of people working and those not working – the’total economic support’ ratio.  The old age dependency ratio is expected to rise by 42% by 2041, whereas the total economic support ration will only rise by about 1%.

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Based on this measure, better pensions could be paid without the need for significant tax rises, the think tank said.

It also described attempts to encourage savings to cover the pension shortfall as ‘misguided’ because, it said, many non-savers are too poor to start saving.