FT letter on US pension reform proposals

by Dr. Ros Altmann

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I was astounded
to read the Comment piece on pensions scaremongers (Nov 8th),
recommending that US Social Security deficits could be easily cured
by indexing pensions to prices, rather than wages and allowing
people to contract out of the state system into private investment
arrangements. Is this not exactly what we in the UK have tried to do
over the last 20 years or so? Given the yards of space your paper
has dedicated in recent months, to detailing what has gone wrong
with the UK state pension system, and the urgent need for reform, it
seems somewhat strange to read a recommendation that the US should
adopt this very system.

Even the Tories, who broke the earnings link, are now calling for it
to be restored and contracting out has failed millions of people,
who are finding that they will receive less from their private
pension than they would have done if they had stayed in the state
scheme. Furthermore, our own ‘shareholder culture’ has left many
pension funds woefully short of the assets required to pay pensions.
The UK experience clearly shows that such palliatives, which may
have short term appeal, are certainly not the answer to pension
problems in the longer term.