The future of pensions
The strike by university staff over proposed changes to their pensions, which could leave many considerably worse-off in retirement, is just the latest in a string of bad news pensions stories, following in the footsteps of BHS, Carillon, British Steel and Toys R Us. The number of employers offering defined-benefit pension schemes has shrunk to a level close to extinction.
At the same time, the introduction of auto-enrolment means millions more are now saving for retirement, although the contributions being paid into these schemes are unlikely to provide a comfortable retirement.
Meanwhile, the government is trying to reduce their huge spending on pensions by increasing the age at which we qualify for the state pension - recently announcing their intention to bring forward the date at which State Pension Age will rise to 68. But their commitment to retaining the ‘triple lock’ - a guarantee to uprate the state pension by the highest of average earnings, inflation or 2.5 per cent - has been criticised by some as being unaffordable and the cause of intergenerational inequity.
Are these problems the inevitable result of people living longer and the increasing proportion of retired people in society? Or are there other factors at play? How does the overall landscape of pension provision look and what level of income might people expect in retirement? What are the new models for pension provision? Is risk aversion a problem for pension schemes? More generally, can a fairly moribund economy provide the retirement we once hoped for?
actuary; founder, First Actuarial