Hain warns of pensions nightmare by 2050

Click to follow

Peter Hain, the Secretary of State for Work and Pensions, warned today that individuals must take personal responsibility by saving for retirement in order to avoid the nightmare of a pensions crisis in years to come.

Speaking before a second reading of the Pensions Bill 2007, Mr Hain said action was vital to prevent future generations of workers being left struggling to pay for an ageing population. The Bill proposes automatic enrolment from 2012 into good workplace pensions with an employer contribution of at least 3 per cent.

Warning that radical change is needed, Mr Hain said that if the challenge of under-saving was not tackled, by around 2050 "we face a nightmare".

"One hundred years ago, few people lived long enough to collect a State Pension on average, men only survived to age 49 and women to 53," he said. "Today, one in four babies is expected to live to 100. People are living longer, are more active and expect to be able to enjoy the type of lifestyle in retirement they had while working.

"Around three-quarters of people say they will need more than the State Pension to live on. But actions do not match words; only around four in 10 working-age people are saving into a private pension."

Mr Hain said the Pensions Act 2007 put in place the first part of a new settlement providing a solid foundation for private saving by extending coverage from 2010 and restoring the earnings link to the Basic State Pension in 2012, or by the end of the next Parliament. State Pension age will also increase gradually to £68 by 2046 so that future generations are not left footing the bill for increasing longevity.

The new Bill is expected to make it easier for people to save through automatic enrolment into a qualifying workplace pension scheme, including the new personal accounts scheme.

"Automatic enrolment will combat the inertia which is such a barrier to saving, while the minimum employer contribution and tax relief will mean individuals' contributions are matched 1 for 1," Mr Hain said. "But it's crucial that individuals play their part in this renewed social contract. To achieve the type of lifestyle they expect in retirement, they must take personal responsibility by participating in a pension."

Looking for credit card or current account deals? Search here