Pension policy looks to future

THE reason so many people are failing to adequately prepare for their retirement is because government policy is so convoluted. Their fears are also compounded by the financial misery suffered by all those who saw their carefully accrued "nest eggs" compromised by Gordon Brown's catastrophic raid on pension funds when New Labour came to power.

Yet, despite this, it has only taken the coalition five months to put in place a series of meaningful reforms. It remains to be seen whether Vince Cable's notion of a 140-a-week state pension for all will come to pass, but it is encouraging that Ministers have, at least, grasped the scale of the problem.

Likewise, the Government's insistence yesterday that all UK companies will have to offer their staff a pension from 2012, even those earning as little as 7,475 a year (the level at which income tax becomes payable). Individuals simply cannot afford to continue sleepwalking into the future and hope that the state will foot the bill for their retirement when people are living longer.

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At a time when Ministers are also grappling, belatedly, with the gulf between private and public sector pensions, this new measure will certainly help people, particularly newcomers to the labour market, become more aware about the need to save for the long-term.

Of course, this could pose difficulties for small companies already struggling to survive. Yet, without an element of compulsion, policy will just drift – with potentially ruinous consequences. And, while the concerns of such businesses are entirely legitimate, the proposed reforms appear to be far simpler to implement than any policy put forward by Mr Brown – that, at least, has to be a start.

However, the challenges remain immense. Take students graduating from university in five years' time. As well as contributing to their pension, they will be trying to pay off their increased tuition fees

– and attempting to gain a foothold on the housing ladder. It will not be easy, but at least a strategy is evolving and the Government is acknowledging that "doing nothing" is not a viable policy.