23 January 2014
Policy Exchange think tank ignores cost of living struggle in backwards proposals to tackle “pensioner poverty”
Policy Exchange – a think tank led by Tory MPs – has proposed the Help to Save scheme to force people into pensions contributions in order to tackle the problem of “pensioner poverty”.
Whilst avoiding pensioner poverty is an extremely important issue, the IER is sceptical about the proposed scheme as it will make life even harder for those who are already struggling to make ends meet. It seems that the proposal will have a direct negative effect on workers and their wages.
Policy Exchange thinks that people should be banned from opting-out of workplace pensions. In addition, the think tank wants to see a system where as people’s salary increases, a higher amount of the wage will be automatically redirected to pension savings.
The report says that someone on an average salary, should, according to Policy Exchange, be saving over six times they are at the moment to generate the government’s recommended income of £16,200.
Currently, the average pension pot is estimated by the think tank to be £36,800, which would only generate a retirement income of £1,340 at today’s annuity rates.
Whilst it is true that many people’s retirement income is too low, the problem with the proposal made by Policy Exchange is that workers’ salaries are already so low they are often subsidised by the government through working tax credits, and even those once defined as middle classed are struggling to make ends meet due to rocketing living costs.
If workers are forced to remove money from their wages in order to contribute to their pensions, they would be struggling even more than they already are.
Policy Exchange, it seems, have got the situation backwards. While it is laudable to fight poverty among the elderly, one cannot achieve this by putting even more pressure on today’s poor. A realistic increase in wages for those on low pay must be seen if Britain is to weather the growing pensions bill in the future.
If you are interested in the fight for a fair pension for workers, the IER is hosting a conference in London on February 12, at the Unite Building. The conference will address the use of pensions and what we can do to improve the situation.
We urge you to come along as we will be joined by a vast number of experts on the subject who will provide an insight into the situation. We hope to see you there.