You're on Your Own: How Policy Produced Britain's Pensions Crisis - Softcover

The UK state pension is the lowest in the developed world. From the start, it was intended to prevent absolute destitution in old age, whilst encouraging all those who could do so to make their own arrangements to secure a decent standard of living in retirement. This aim has not changed. Successive governments have encouraged all citizens to join private pension plans, which would guarantee this standard of living. The aim of public policy for the last 30 years has been to encourage saving and to permit more personal choice. In this book the authors show how and why the very opposite has occurred. Saving has decreased and most people feel 'scepticism, bewilderment and confusion' when thinking about post-retirement income. Defined benefit (DB) schemes have declined until they scarcely exist outside the public sector. They have been replaced by defined contribution (DC) schemes which, the authors argue, are not really pensions at all, but only savings vehicles - and very unpredictable ones at that. To call a DC scheme a pension is like calling a tent a house. The authors use the example of hypothetical twin brothers who start work on the same day, one for a company offering a DB scheme, the other making a DC arrangement. The latter will receive a retirement income which will be just one quarter of his DB twin's. More than seven million people over the age of 25 are not contributing to any private pension at all - which means that, given the inadequacy of the state pension, they are on course for an extremely impoverished retirement. Millions of people in Britain are going to retire with no financial assets whatever. Unless effective action is taken to increase the amount people save, and the effectiveness with which those savings are converted into post-retirement income, poverty amongst older people is going to increase on an enormous scale.

Peter Morris worked in the finance sector for 25 years. In 2010 he wrote a report about private equity for the Centre for the Study of Financial Innovation. He can be contacted at morrisp1@aol.com Alasdair Palmer is Public Policy Editor of the Sunday Telegraph, email: alasdair.palmer@telegraph.co.uk