Julian Knight: If we're all going to live to be 100, then heaven help us

Half of today's 30-year-olds could live till they are 100, insurer Paternoster said last week. That titbit prompts the inevitable question, how on earth are we going to pay for huge numbers of people who, due to ageism and the physical toll of old age, will spend several decades unable to work?

The Government's line is we must work longer and save more. But to date all it has done to bring this new world about is reform the state pensions system. Granted, this was a big deal. However, nearly all the reforms in the 2007 Pensions Act – such as raising the pension age to 68 – were a case of the Government ensuring that it didn't spend a much higher proportion of tax revenues supporting an increasing number of older people.

Next to nothing was done to encourage us to save more for our retirement or for the long-term care many will need later in life. And the problem of how to save the crumbling UK workplace pensions system, once a world leader, was left to twist in the wind.

In the upcoming Queen's Speech, the Government will attempt to deal with this last issue. A new Pensions Bill will set up a system of personal accounts, from 2012. We already know the basics: the plan is that every worker who is not already a member of a company scheme will be automatically enrolled into a personal account. Contributions from employers, employees and the Government will enable workers to put away around 7 per cent of their salary for the future.

But any pensions expert worth his or her salt will tell you that's nowhere near enough to provide for a half-decent retirement. What's more, one element of the Bill will harm hard-pressed workplace pension savers. Last week, the Government said it wanted to allow those companies running the more generous final salary pension schemes to reduce the amount of money they pay into the pension pots of workers who have left their employment.

Instead of being legally obliged to boost these by up to 5 per cent a year, companies will only have to raise them in future by up to 2.5 per cent.

This change is likely to have a huge impact because so many people nowadays have many different jobs in the course of a working life and leave behind pensions with previous employers. If these pensions lose value relative to the real rise in the cost of living, millions of people will be worse off in retirement.

Many of today's 30-year-olds will be counting the cost of this move in their 70s, 80s and even, according to Paternoster, their 90s.

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