William Kay: Will there be a pensions shortfall? You can bet your life on it

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The Independent Online

The good news: the Government finally recognises that there is a pensions crisis. The bad news: it doesn't have the faintest idea what to do about it.

This week pensions emerged from their traditional sleepy backwater to claim, if not top, then a remarkably high billing at the Labour party conference.

Most notably, Tony Blair took time off from agonising over Iraq to promise that next term a Labour government would "design a pensions system that has the basic state pension at its core". Cor blimey, gov, I thought we had one of those already, must be the old memory playing tricks wiv me.

Keener minds than mine detect a hint that the state pension will do a dance of the seven veils and be stripped of its means testing. At fringe meetings in Brighton, the work and pensions secretary, Alan Johnson (pictured, right), and his minister, Malcolm Wickes, backed away from means testing.

Could it be that the present £79-a-week basic pension will be lifted to the glorious heights of £100, only to be clawed back in tax from the better-off? It looks very much as if the present tax trap will be closed, as Mr Johnson went so far as to say that "we don't want to penalise people with modest savings from keeping those savings".

All these noises suggest that something is going on in the corridors of Whitehall, although it will come to fruition too late for ministers to say more than "trust us, we'll get it right next time". As ever, it's those first two words that are the fly in the ointment.

As it is, knives are being sharpened in advance. Or, as Mr Johnson put it this week, let's have a healthy debate.

It looks as though that is precisely what he is going to get: it was standing room only for latecomers at the fringe meeting that I attended.

Adair Turner, another speaker at the same meeting, made it plain that the interim report of his Pensions Commission will paint an apocalyptic mural of doom, disaster and chaos. He even predicted that his recommendations, which we won't see for a year, will be hedged with caveats.

The basic problem, in Mr Turner's eyes, is that everyone, actuaries, governments and individuals alike, has consistently underestimated the recent dramatic increases in longevity and have been too slow to react. So we're playing catch-up, which will not be good news for those retiring in the next 25 years.

But a new villain was unmasked this week. Sir Peter Davis, the recently departed chairman of Sainsbury's, has popped up as head of the Employers Task Force on pensions, which is due to report soon after Mr Turner.

Sir Peter has found that employers are apathetic to cynical about setting up occupational pension schemes, arguing they are too costly and expose them to unwanted liabilities and possible accusations of mis-selling.

This echoes a survey published this week by Cass Business School and the Pensions Institute (this pensions lark is turning into a growth industry). It found that company finance directors are "a very significant barrier" to more people being offered an occupational scheme.

That chimes with Government thinking, which wants to see as much funding as possible coming from the private sector - personal or corporate, it doesn't matter.

Tough on the four million self-employed, though.

* As many as 500,000 small businesses are threatened with ruin this weekend after a casting-vote decision by the Special Commissioners of Income Tax against a husband-and-wife IT firm, Arctic Systems. The owners, Geoff and Diana Jones, have equal shares in the business, so have been splitting annual dividends equally. But the Inland Revenue claimed this was just a device to make use of Mrs Jones's tax allowances. This leaves the couple with a crippling £42,000 tax bill for last year. At this rate Gordon Brown might as well ban all companies, from the biggest to the smallest, for they all have more discretion than employees to cut their tax liability. But their activity generates a whole lot more revenue. The uncertainty alone is a deterrent.

Alvin Hall: boot camp or control freakery?

If you can stand the 21 cheesy colour photos of the author, next week Alvin Hall is publishing one of the most user-friendly money advice books to have hit the stores in a long time.

Beneath the genial persona, Mr Hall, the personal-finance world's answer to Eddy Murphy, goes in for the "boot camp" approach to sorting out our finances which he has extolled on television. "Shape up or ship out" is very much the message.

The mainspring of the book, forbiddingly entitled What Not To Spend, is a personal profit and loss account and balance sheet, just like a company.

And Mr Hall takes the analogy even further, urging his followers to write themselves an annual statement of how they have done in the past year, cataloguing successes and failures.

This set me thinking about how I organise my finances, and I realised I fall well short of the Hall ideal.

My key is my bank current account. I look at it pretty regularly and get a feel for whether the amount of money in there is rising or falling, allowing for lumpy payments such as holidays or a new washing machine.

Then I work back from that to see when I last paid into or drew out from my savings account. The two accounts together give me a fair idea of whether I'm overspending or not.

Then I look separately at longer-term commitments such as pensions, Isas, mortgage or life insurance.

It's not as precise as Mr Hall's system, but it covers the main bases.


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