Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Pay & benefitsPensions

Forget all the pensions rhetoric

by Personnel Today 26 Oct 2004
by Personnel Today 26 Oct 2004

Ten years ago, nobody believed that occupational pensions policy was exciting. Employers thought they could safely leave things to the actuaries, investment managers and consultants. Employees took it for granted that their pensions were secure.

Demographic change, longer life expectancies and declining asset prices are said to make final-salary pensions unaffordable in the future. Most employers have closed their final-salary schemes to new employees and now offer defined-contribution alternatives.

The Association of British Insurers has calculated that the UK has a 27bn savings gap. If private saving fails, then the only alternative will be for the state to shoulder the burden – an option that all the major parties have identified as too costly, demanding unacceptable increases in taxation.

Adair Turner’s Pensions Commission has set out the rather unpalatable alternatives confronting policy makers. Simply put, we must either work longer, save more or accept lower incomes in retirement.

Most workers make the entirely rational judgement that they will never be able to defer enough consumption today to save for an adequate pension in the future. This suggests that any increase in private pension provision depends on a partnership between the state, workers and employers. There must be a decent basic pension that keeps people above the poverty line, but those workers who can afford to save should do so and employers should contribute too.

It is difficult to give clear advice to employers and employees at a time when policy is in a state of flux. Much will depend on decisions about the level of the basic state pension and the role of means-tested benefits in the medium term.

Turner has argued forcefully that the UK’s voluntary system of pension provision really is in the last-chance saloon. If there is no evidence over the next year that employers and employees are making independent efforts to boost saving, then the case for compulsory contributions from both becomes much stronger.

Most workers approaching retirement age today can be confident that they will maintain their living standards in retirement. Pensioner incomes are the highest they have ever been and will continue to rise in the short term. However, the real problem confronts those who will reach retirement age in 15 or 20 years’ time. If current trends continue, they run a serious risk of retiring in poverty.

Employers need to recognise they have a responsibility to encourage their workers to save. That means, in turn, that employers ought to be making some contribution to workers’ pensions. Those employers who fail to do anything to help their workers save for retirement may face significant recruitment and retention problems in the future.

But all of this is wishful thinking without a new pensions settlement that can secure the support of political parties, employers and the public.
The response to Turner suggests that the politicians are reluctant to abandon their standard partisan rhetoric. They must do so in the future if we are to meet the pensions challenge.

Division within the Government

The issue is also dividing the Government. A key department is Work and Pensions, a long-standing advocate of a more enlightened approach to late-life working. Former Secretary of State Andrew Smith called for an end to the cliff-edge of retirement and a clear distinction to be drawn between the age at which individuals become eligible for their state pension and the age at which they choose to retire from paid work. Its research points to the need for more flexible extensions to working lives and more choice in the retirement process.

The DTI has adopted a more pro-business line, cautioning against legislation which undermines the competitiveness of UK businesses. It is drafting the legislation, along with other parts of the Equal Treatment Directive. But other government departments are also embroiled. The issue is further complicated by Civil Service reforms which will involve large-scale departmental relocations and restructuring. The Civil Service retirement age of 60, plus the availability of early retirement packages, have tended to ease these kinds of reorganisations and certain officials may see mandatory retirement as assisting in this.

The Government has now set up the Social Partners Group – a stakeholder committee of employer, employee and union representatives – to agree a way forward.

David Coats, associate director, policy, The Work Foundation



Personnel Today
Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

previous post
Unison members vote to cancel Swansea Council IT strike
next post
We’re not ready for an ageing workforce

You may also like

Sharp rise in firms offering enhanced parental leave...

11 Aug 2022

Top earners’ pay soars by 10% while lowest-paid...

8 Aug 2022

Office could be sanctuary for workers fearing winter...

4 Aug 2022

Inflation forecast to hit 13% in autumn says...

4 Aug 2022

Shell to pay workers a one-off 8% bonus

4 Aug 2022

BT strike: company ‘has stuck two fingers up...

29 Jul 2022

Police ‘let down’ by ministers with insufficient pay...

28 Jul 2022

UK employees increasingly seek temp work for extra...

28 Jul 2022

Government launches DB pension long-term funding consultation

26 Jul 2022

Average UK households £8,800 poorer than French and...

21 Jul 2022
  • 6 reasons why work-based learning is better than traditional training PROMOTED | A recent Fortune/Deloitte survey found that 71% of CEOs are anticipating that this year’s biggest business disrupter...Read more
  • Strengthening Scotland’s public services through virtual recruiting PROMOTED | This website is Scotland's go-to place for job seekers looking to apply for roles in public services...Read more
  • What’s next for L&D? Enter Alchemist… PROMOTED | It’s time to turn off the tedious and get ready for interactive and immersive learning experiences...Read more
  • Simple mistakes are blighting the onboarding experience PROMOTED | The onboarding of new hires is a company’s best chance...Read more
  • Preventing Burnout: How can HR help key workers get the right help? PROMOTED | Workplace wellbeing may seem a distant memory...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+