So it is setting up a new Pensions Commission along the lines of the one in 2006 that suggested people working in the private sector should automatically be enrolled in a pension scheme. The Commission will look at the numbers and report on what’s to be done by 2027.
The problem is that there never was a fund – each generation of working people has always had to pay the pensions of the previous generations – and as people live longer that means higher and higher taxes on wages. Even if the retirement age goes up further, which it will, whatever the Government provides won’t be enough. People have to save more so they can top up their state pensions.
We will have to wait two years for it to report, but actually it’s not hard to see what it is likely to say. There may well be a suggestion that the increases in state retirement age should come through even sooner. There may be something on that third rail issue, the triple lock on the state pension, whereby it increases by whichever is highest of average earnings, consumer prices, or 2.5 per cent. But the main thrust of its recommendations is likely to be that everyone in workplace pensions should save more. After all, its idea of auto-enrolment is seen as a great success, increasing the proportion of employees in a pension scheme from 55 per cent in 2012 to 88 per cent now.
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There’s nothing wrong with all this, though it’s a tough message for families that are already struggling on low earnings to tell them that the state won’t be able to pay them a decent pension – that they have to tighten their belts and save more. There must be a worry, too, that requiring higher pension contributions from companies will have a similar impact as the increase in National Insurance Contributions that they now have to pay: that many will cut their workforce and unemployment will start rising.
But the Government has to say that it has reached the limits of taxation. This means not only explaining that it simply isn’t fair to load more taxes on working people, the message it is trying to get over at the moment. It also means saying there is no other source of revenue. That is a tough one too.
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