Letter commenting on pension burdens faced by UK employers – 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

    Letter commenting on pension burdens faced by UK employers

    Letter commenting on pension burdens faced by UK employers

    Letter commenting on pension burdens faced by UK employers

    by Dr. Ros Altmann

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

    It was
    interesting to read that the majority of employers know that the
    pension contributions they are making for their employees will not
    deliver generous pensions. The question we need to consider is why
    this should be a surprise to anyone.

    Pension expectations need to be adjusted. Pensions were originally
    designed to last for 5 or 10 years, to reward long-serving employees
    for loyal service and prevent them leaving work and living in
    poverty for the last few years of their life. Nowadays, however, the
    average job tenure is around 5 years, but we are trying to make
    pensions last for 25, 30 or 40 years. Can employers really be
    expected to shoulder this burden? The cost of providing what used to
    be thought of as a ‘standard pension’ (around two-thirds of final
    salary) has become so expensive that it is generally now
    unaffordable for all but the highest earners. Over 20% of salary
    would probably need to be put aside for 40 years, to provide a good
    pension for 25 or 30 years of retirement. Employers contributing 5%
    or even 10% of salary to a money purchase scheme are, therefore,
    quite correct to believe that this is unlikely to provide a generous

    Some serious re-thinking is required. Pensions policy is light years
    behind the changes in working practices, demography and health
    status and the sooner we revise social expectations of retirement
    and pensions, the better. The Government and the individual will
    need to shoulder more of the burden in future, since employers alone
    cannot afford the current expectations of pensions.

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