FT letter on economics of pensions and risk – Ros Altmann

    Ros is a leading authority on both private and state pensions,annuities and
    retirement policy. Numerous major awards have recognised her work to
    demystify finance and make pensions work better for people.

  • Ros Altmann

    Ros Altmann

    FT letter on economics of pensions and risk

    FT letter on economics of pensions and risk

    FT letter
    on economics of pensions and risk

    by Dr. Ros Altmann

    (All material on this page is subject to copyright and must not be reproduced without the author’s permission.)

    Joseph Stiglitz’s
    warnings to US policymakers (FT 21st March) excellently encapsulate
    the results of the UK’s past twenty year pension privatisation
    experiment. Offloading the costs of pension provision away from the
    state system onto employers or individual accounts, has left us with
    a pensions crisis, insecurity and poverty among the elderly, over
    half of pensioners needing means tested benefits and mushrooming
    unfunded pension liabilities – for both public and private sector
    employers – which dwarf our national debt.

    There seems to be a fundamental misunderstanding of the economics of
    pensions. Transferring risk from state to private sectors does not
    make that risk disappear. The costs and risks of providing private
    pensions are too high and their ultimate failure to provide adequate
    incomes pushes the burden of support back onto the state anyway.

    The bottom line is that pensions, as we currently think of them, are
    unsustainable. We are trying to make them last too long. Rising
    numbers of people demanding decent pensions for decades, while not
    being part of the productive economy, is a recipe for long-term
    economic decline. And a huge waste of resources. We must re-think
    the whole concept of retirement. Part-time work and gradual
    withdrawal from the labour force at older ages would mean pensions
    supplementing earnings, not totally replacing them. Private savings
    cannot deliver enough to provide decades of decent pensions in
    future. Haven’t we learnt that already?

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