COMMENT
Avert Your Own Pension Crisis

By Jane Mack (TMFJane)
September 26, 2005

It must be difficult being David Blunkett. As the current Work and Pensions Secretary, he's the one who's got to deal with probably the biggest crisis facing the country today - pensions.

For example, looks at the following problems:

• Around 15 million working age people make some sort of contribution to an occupational or personal pension. But, around 20 million do not.

• Today's 40- year-olds are as likely to live beyond the age of 70 as their parents are to live beyond age 65. One quarter of 40-year old women are expected to live beyond the age of 95.

• Over 3.5 million households are now eligible for the Pension Credit which guarantees a minimum income of £109 a week. The number is expected to grow by around one-third over the next 10 years.

It's clear the government's potentially got rather a lot of long-living, non-saving people on their hands and that something must be done. As David Blunkett is expected to speak on the topic at today's Labour Party conference, it's not surprising that various organisations and unions are taking the opportunity to bamboozle him with their suggestions about he should handle the growing pensions crisis.

The Pensions Policy Institute (PPI) wants to do away with the means-tested Pensions Credit saying it costs 10 times more to administer than it does to deal with the state pension itself. They say it would be far simpler to pay a guaranteed basic state pension of £109 a week in the first place.

The Institute of Directors wants the same with the added suggestion that everyone ought to work until they're 70 before being eligible for it. The National Association of Pension Funds agrees although they think 70 is a bit harsh and suggest that working till 67 would suffice.

Meanwhile, in the public sector where the government has suggested raising the standard age of retirement for the local government pension scheme from 60 to 65, union leaders are helpfully threatening strike action as a way of dealing with the problem.

And then there's the government's own Pensions Commission which has been investigating ways of handling the growing crisis. They haven't published their final report yet but they've has already said that either taxes/national insurance contributions will have to rise, we must all save more or we must all work longer - or else a combination of all three.

All I can say to the current kerfuffle is that while the government faffs around wondering what to do, I suggest you take matters into your own hands and start saving for your retirement now.

Save into Pensions and ISAs & read Five Ways To Secure Your Retirement