The pensions puzzle

Existing pensioners feel let down

By Nick Assinder BBC News Online political correspondent

It's the issue no one likes to think about until it's probably too late.

And, when anyone does raise the issue of pensions, it is usually in hushed tones - like confessing to an unfortunate medical condition.

Crisis building for future OAPs

The government is facing accusations that it has approached the issue in precisely the same manner and that it may already be too late for many future pensioners.

The problem has been growing for at least the last two decades but most now agree it has reached crisis proportions.

End of Serps

The Tories first attempted to get to grips with it in the 1980s when it was claimed that there simply would not be enough money in the pot from existing taxpayers to pay future pensioners.

The widely-admired State Earnings Related Pension scheme (Serps) - created by former Labour minister Barbara Castle and defended by her to her recent death - was deemed inadequate.

And ministers embarked on the task of persuading individuals to take out private pensions and Serps was, to all intents and purposes, scrapped for most people.

There were dire warnings of the consequences if people did not start looking to their futures and preparing for retirement. The omens were not good and looked worse in the light of an ageing population.

But then came the pensions mis-selling scandal, not discovered for years after it was perpetrated on unsuspecting punters, many of whom may never fully recover.

So far, the investigation into the affair has resulted in action against over 300 companies and fines of around £10m.

Mass exodus

Probably more worryingly is that it has undermined public trust in private pension schemes.

Brow's 75p caused mass protests

But still the issue remained one that could not be driven to the top of the political agenda, despite politicians' best efforts.

Many political journalists remember the day before the 1997 general election that the then prime minister John Major called a surprise press conference in his office.

Everyone thought he was about to announce the date of the election - in fact it was to introduce David Willetts as his new pensions supremo.

The disappointment was palpable and it was only a mixture of politeness and the fact the doors had been locked that stopped a mass exodus.

But the issue continued to cause huge concern amongst those not instantly sent into a stupor by the subject.

Raw deal

And it can cause serious political problems for governments.

Chancellor Gordon Brown discovered that to his cost when, in typically prudent style, he carried out the normal calculation for the annual pension increase and, when discovering it only came to 75p paid exactly that amount to OAPs.

It was an unusually inept political mover from the normally surefooted Chancellor and led to demonstrations and, in the end, a climbdown.

But things have got no better. Now it is a two pronged assault.

There are existing pensioners who believe they still get a raw deal, despite the government's pensioner credit and substantial increases.

And there is the crisis over future pensions, not helped by continuing mess ups over the figures and the mass abandonment of final salary schemes.

Gradually, however, the message is getting through to younger people.

A recent survey showed those in the 16-44 age group were now more willing to consider raising their pension contributions that older workers.

Ticking timebomb

The government has committed itself to acting on the issue with the broad aim of ensuring there are the right measures in place to encourage people to save for their retirement.

There are three studies currently underway - into pension regulation, savings and the tax regime.

The first two will be published within the next month and ministers have promised to respond by the end of the year.

But the great fear for many is that it is already too late.

And that suggests this is a time bomb that will eventually explode under whichever government is in power at the time.