Pensions worries unnecessary, says think tank

Pensions worries unnecessary, says think tank

	Published : Mon, 31 Oct 2005 13:30 By : David Simms Print this Story

LONDON: There is no pensions crisis as the nation’s rising productivity levels will ensure little negative impact on the living standards of an ageing population, according to Tomorrow’s Company.

Nevertheless, the think tank’s report said, the state pension needed overhauling and suggested it scrap means-testing. As the nation’s industries become more productive, workers will be able to earn more, pay more taxes and contribute more towards state pensions.

However, the rising productivity would have little effect on day-to-day lifestyles. The report somewhat dissipates the gloom that had set in following warnings about a pensions deficit. Last year, the Pensions Commission had reviewed the situation and its report then had created a climate of pessimism.

The Commission’s review was criticised as being based on the unreliable “old age support ratio”, a method where the number of people aged 65 and over is compared with the number of people of working age.

The Tomorrow’s Company’s report uses the “economic support ratio” where the number of working people is compared to the number not working, unlike the Pensions Commission’s method which overlooks the nine million people who do not work although being of working age.

As expected, the results of the two organisation are different: the Commission predicting a fall of 42 percent in the ratio of people aged 65 versus those under, in the period between 2003 and 2041; whereas Tomorrow’s Company says the change would be more manageable with a drop of only 13 percent over the same period.

Even at the currently modest growth rate of 1.75 percent a year, productivity per head can be expected to double by 2045, on a macro scale - growing enough to generate the resources needed to ensure a decent living standard for every ageing UK citizen. But the government would be expected to create an environment where productivity can thrive.

Tomorrow’s Company also advises against tightening one’s belt as spending less was likely to harm the economy. Warnings about a pensions crisis over the past few months had made people think saving more necessary. Economists warn that higher savings would only slow economic growth.