UK: All want a richer old age

But do we want to be forced to pay for it?

LONDON (SUNDAY HERALD), April 10, 2005:

Teresa Hunter watches the pensions row heat up as government tries to take with one hand while refusing to give with the other

Pensions look set to become a major election battle ground following speculation that Labour are planning compulsory pension contributions if they are returned to power in May.

A move towards compulsory contributions has long been the pensions solution which dare not speak its name. Behind closed doors, many in the industry tacitly acknowledge it may be the only way to resolve the current crisis.

Though publicly Adair Turner, chairman of the Pensions Commission denied it, many, not least the TUC, believe his report published last year pointed to the inevitability of forcing people to save more.

But many others are strongly opposed to such a move. Shadow pensions secretary David Willetts says: “I believe the challenge is to come up with better incentives to encourage people to save, not to force people, for whom it may not be the best option, and who may lose means-tested benefits as a result.”

Other critics point to Australia’s experience, where it is argued household savings fell sharply when compulsory pensions savings were introduced . For many UK voters, though, the introduction of compulsory savings is simply a backdoor method of increasing tax .

The group for whom the very mention of introducing further compulsion is a red rag to a bull is that of the estimated 100,000 employees who have lost part or all of their pension, a huge chunk of it based on compulsory pension contributions, following the collapse of their company schemes.

For up to 30 years, they paid into the “original” compulsory savings scheme, the state earnings-linked top-up. They are furious that they now face the very real prospect of getting back precisely zero for those decades of contributions.

One of the largest unions with members affected, Amicus, wrote to Treasury secretary Paul Boateng nearly a month ago demanding answers to a string of questions relating to these victims’ entitlement to the state top-up. It has yet to receive an answer.

These questions were also left unresolved by the publication of the regulations governing the Financial Assistance Scheme last week and its distribution of £400 million to compensate scheme victims .

A spokesman for the Department of Work and Pensions said this was because no decisions had yet been taken, despite the fact that the FAS rules are now in place......

The Parliamentary Ombudsman is currently assessing a complaint from victims being denied their GMPs, and is expected to issue a judgment in a couple of months.

Copyright © 2005 SMG Sunday Newspapers Ltd.