AITC director general Daniel Godfrey is calling on the Government to
introduce “free” stakeholder pensions in a move which he claims would solve
the UK pension funding crisis by 2050.
In an article for Money Marketing this week, Godfrey warns that continuing
the status quo – where today's workers fund today's pensioners – will lead
to either “massive tax increases or massive poverty”.
He says the Government must borrow money now to make modest contributions
to every worker's choice of stakeholder, ensuring everyone has enough to
keep them off income support by age 65. As the number of fully-funded
people reach 65, Government spending requirements would fall – a saving
which it could use to pay off its debt. Once the debt was repaid, it could
Godfrey says although compulsion is also a solution, he believes the
Government realises it would be political suicide to implement.
He says: “This solution spreads the costs of the transformation to
universal funded pensions across the generations that will benefit from the
change. It would take guts for any Government to take on such a large
borrowing requirement when the benefits will not be fully realised for 40
years. But investing in the future now and allowing the benefits of equity
investment to work their magic over longer periods of time could get us and
our children out of quite a hole.”
Leader, p25, Inside Edge, p26