[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Tuesday, 12 October, 2004, 07:32 GMT 08:32 UK
Millions facing pensions misery
Cash
The State Pension is likely to get smaller and smaller
Millions face retirement poverty unless they work longer or save more, a major report into UK pensions is expected to warn on Tuesday.

The Pensions Commission report is expected to say that Britons are saving far too little for their retirement.

A lack of public confidence in pensions is likely to be cited as a reason for low UK savings, with the problem exacerbated by longer life spans.

But the Commission will not recommend a course of action until next year.

Dark picture

Adair Turner, head of the Pensions Commission, was asked in 2002 to lift the lid on the state of UK retirement provision.

A hand and a calculator

The Commission has been given unheard of access to all relevant departments of state to gain a thorough understanding of UK pensions.

The report is expected to paint a dark picture of the likely costs of improved life expectancy.

Analysts have long warned that an ageing population means there will soon be too few taxpayers to support the over-65s through the state pension.

"The big challenge is arising from the one very simple fact that we're living longer and we're having fewer children - it is basic demographics," Mr Turner told BBC Breakfast News.

"Faced with that situation we're either going to have poorer pensioners, or we're going to have to pay more tax, or we're going to have to save more or we're going to have to retire later - nobody can avoid that choice."

Stock market mirage

Mr Turner said the stock market boom of the 1990s had stored up problems for many company schemes.

UK'S PENSION CRISIS
Why many are heading for poverty in old age

"The stock market boom basically made people believe that you got something for nothing," he said.

"Therefore companies were making more and more generous promises to some groups of people but they weren't putting in any more money.

"It's that same stock market boom that convinced first Nigel Lawson in 1985 and then Gordon Brown in 1997 that (pension funds) were in so much surplus that they could afford to pay more tax."

Stark choices

The Commission has been examining workplace and private pension provision and the current incentives for people to save.

These areas have suffered in recent years as employers cut contributions to their workers' pension schemes and the public lost confidence in retirement savings.

If we're all going to live much, much longer in retirement then we are clearly going to have to work more to pay for that
Adair Turner, Pensions Commission chairman

There have been several reports on the pension sector, but the Commission's report on Tuesday is the first overarching review of UK retirement provision

The report is set to identify a series of stark choices for policymakers, including:

  • Raise taxes to pay for the state pension
  • Increase the savings levels
  • Increase the state retirement age
  • Accept that the number of poor pensioners will grow

Mr Turner said the eventual solution will likely be a mix of the different proposals.

But he added that raising the average retirement age was inevitable.

"Everybody accepts that, because if we're all going to live much, much longer in retirement then we are clearly going to have to work more to pay for that," he said.

"That's a different thing from what we do to the state pension age. One of the things we may head towards is people working into their late 60s but working part- time, while still taking the state pension."

Under the Commission's remit, it need not make recommendations as to how the pension crisis should be tackled until autumn 2005.

Those recommendations, likely to be made after the next election, could provide the bedrock for future pension legislation.


BBC NEWS: VIDEO AND AUDIO
How will the pensions 'black hole' affect people



RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific