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Income crisis is looming as the state steps back

Reform of state pensions must take place as a priority if the UK is to avoid tomorrow&#39s pensioners being worse off than today&#39s pensioners, warns the Pensions Policy Institute.

The warning came at the PPI conference in London last week after reports that there is no indication that future pensioners will be any better off despite Government initiatives such as Sandler&#39s suite of products and stakeholder pensions.

It says both the state and employers are reducing long-term pension commitment and there is no sign people are making up for this through their own pensions or other savings.

The PPI Pensions Landscape report, published at the conference, reveals that the gap between the poorest and wealthiest pensioners is growing. The average pensioner&#39s income has risen since 1997 but a quarter of pensioners remain in relative poverty.

The research shows that the income of the top fifth of single pensioners rose to 87 per cent of national average earnings or £19,000 in 2001 from 78 per cent in 1997 but the income of the lowest fifth has remained at 21 per cent over that period, giving a current income £4,600.

Speaking at the conference, PPI director and joint author of the report Alison O&#39Connell said: “Behind the obvious short-term challenges lies a potential crisis of lower incomes that will be apparent only in the long term. We suggest an open review of future ambitions for state pension policy.”

Conservative Shadow Work and Pensions Secretary David Willetts said: “Half our crisis is caused by the affordability of pension promises that have been made by the private sector that cannot be afforded. But it is inconceivable that we will have millions of pensioners worse off in the future – this simply will not happen because people will vote for change.”

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