Leader: Private-sector pensions in need of help

AMID the protest over changes to public-sector pensions, the continuing crisis in private- sector provision has been pushed into the background. This is no mere slippage in investment returns but, looking at the wholesale retreat from defined benefit schemes (those paying a percentage of final salary) is a “seismic collapse”.

Such vivid language does not come from a trade union official but the staid Association of Consulting Actuaries. And looking at the figures gathered on employer preparedness for auto enrolment of staff into group personal pension schemes and their plans to reduce pension costs, the description is justified. A combination of higher contribution costs for employees and push-back of the retirement age from 65 to 67 or later mark the long-delayed onset of a new era.

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This change has been made more difficult by inflation, the reduction in tax relief for pension fund income, the collapse in yields from fixed-interest investments and a volatile stock market. Together, these have eroded public confidence in the rewards of long-term retirement savings and the willingness of employees to put aside as much as they should in the early part of their working lives to build a pension lump sum sufficient to ensure some measure of comfort in retirement.

The government must do more to ensure that pension saving is safe from future raids, while the industry needs to press on with changes to secure greater transparency and lower costs. Change is all the more critical now that property ownership is no longer seen as an easy substitute for a regular contribution pension plan.