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‘Pension target is unlikely to be met’

The Government’s long-term target of achieving 40 per cent state and 60 per cent private pension provision is unlikely to be achieved, according to the Pensions Policy Institute.

A study carried out by the PPI and the Nuffield Foundation concludes that the state is likely to remain the major provider for many people as only the state can guarantee poverty prevention.

The distinction between state and private refers to the delivery of the pension rather than how it is paid for, with public sector and contracted-out pensions counted as private.

The PPI says the role of the state in poverty prevention needs to be improved, scrapping means testing due to its imperfect take-up and offering a more generous, simpler system.

But it says the state’s role should not end there, with more work needed to dec- ide whether reinvigorating voluntary saving through better incentives will work – the preferable option – or if some form of compulsion is required.

The report also says working longer will play a big- ger part of future pension policy, with the labour market having to be adjusted further to take into account older workers.

On gender inequality in pensions, the report says a residency-based scheme would provide a better coverage than the current contributory system as it is seen to be fair and simple to understand. But this move may be too radical and reform to the contributory system could be the better step, with more research needed.

PPI director Alison O’Connell says: “PPI research, based on macro and micro-econ-omic analysis, shows that the 40:60 target does not look likely to be achieved in future.”

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