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.

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