Letter: Private provision not needed to defuse the pensions 'time bomb'

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From Professor Peter Townsend

Sir: The scaremongering of the Anson Report about a pensions "time-bomb" ("Call for action on pensions 'time bomb' ", 24 January) must be dismissed. The Government Actuary and independent researchers have demonstrated that henceforth Britain will experience a slower rate of increase in the elderly population than all other members of the EU except Portugal.

The Department of Social Security has had to revise substantially downwards its estimates of rising costs issued only two years ago. The Government Actuary shows that after the introduction of the 1995 Pensions Act, there will need to be, on present assumptions, virtually no increase in existing rates of contribution to national insurance.

What matters in planning a strategy more than the ageing of the population is the premature retirement of people of active employment age, the problem of getting more young people into work, and the poor opportunities for women to get secure employment at reasonable rates of pay. It is government cuts in the basic retirement pension and in the additional state earnings retirement pensions scheme which have brought impoverishment to pensioners and prospective pensioners alike and must be stopped. Except for top executives British levels of pension are already bottom of the European heap.

Yet Sir John Anson's committee produce recommendations that will worsen the already deteriorating situation of many elderly and prospective elderly. The committee was sponsored by the National Association of Pension Funds. That is a vested interest. Not surprisingly, it proposes to expand "funding" at the expense of pay-as-you-go (PAYG) state schemes.

This will only widen the gap already deepening between prosperous and poor pensioners, and it will increase the vulnerability of prosperous younger groups to catastrophic collapse in their own living standards because of the exigencies of redundancy, unemployment, sickness, disability, bereavement and premature retirement during their working lives.

PAYG makes economic sense as well as social sense for the mass of the population. Higher national insurance contributions can boost national savings. They can provide collective benefits as a form of rights to assist the transition to work. Risks can be pooled at small administrative cost. Instead of paying through the nose for funded schemes, with very high administrative costs and profits, poor accountability, greater likelihood of multinational takeover and relatively poor coverage for unpredictable adversities, individuals can share the costs and benefits of a national scheme, and come to see they have a stake in society and not just themselves. That is eminently affordable, and it is tragic that the Anson Committee failed to address the evidence.

Yours etc,

Peter Townsend

(Emeritus Professor of

Social Policy)

University of Bristol


24 January