Collapse of private pensions continues
One third of over 50s are not bothering with pensions, one fifth have mortgage debt
Radical State Pension Reform urgent as millions face retirement poverty
Many over-50s caught in a trap if Pension Credit will penalise their private savings

by Dr. Ros Altmann

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Saga’s recent Survey has shown that one in five over 50s are still in debt, with mortgages to pay off. The latest MetLife Europe survey evidence shows that a third of over 50s workers are saving in a pension. These figures suggest a continued worsening of our pensions crisis. People have clearly lost confidence in pensions and the situation is deteriorating.

Without any pension or other savings to fall back on, about 3 million people will have nothing but the State Pension to survive on in retirement. The Government says it wants to reinvigorate pensions and retirement – there is clearly a long way to go.

Policy has failed to address this mounting crisis, despite an almost constant barrage of reforms.

Urgent radical reform of our state pension system is long overdue. For the over-50s, saving in a pension scheme is often just not worthwhile, because they are caught in a trap with state benefits taking away their private pension. The State Pension is so inadequate (a full Basic State Pension is just £97.65 a week) that nearly half of pensioners end up needing means-tested Pension Credit and other benefits in retirement. However, if they claim these benefits, they will lose at least 40% and often 100% of their pension income. That makes it very difficult to advise people to save in a pension, because they risk merely saving to replace benefits they would otherwise receive.

The Government’s recent consideration of a flat rate pension of at least £140 a week for all future pensioners with a full National Insurance record would remove this problem of means-testing and make it safe for the over 50s to save in a pension. This kind of radical reform is essential. Without it, we cannot hope to ensure private pensions work properly to deliver extra income for retirees.

The proposals for automatically enrolling all workers into a modest company pension scheme or the National Employment Savings Trust (NEST) will also not be suitable for those closest to retirement unless state pensions are radically reformed.

What matters is not just getting people to put money into a pension fund, but what they ultimately can get out of it. Unless and until it becomes safe for everyone to save in a pension, we cannot hope to properly deal with the pensions crisis. Saga is calling on the Government to help the over 50s with their future pension plans. State Pension Reform is an essential part of this agenda.