The Chancellor’s megafunds won’t resolve our pensions crisis: much larger reform is needed

384     0
The Chancellor’s megafunds won’t resolve our pensions crisis: much larger reform is needed
The Chancellor’s megafunds won’t resolve our pensions crisis: much larger reform is needed

Low pension savings and growing economic threats from climate change mean most people face miserable retirements unless the government steps up its ambition.

The Chancellor has promised the ‘biggest pension reforms in decades’, starting with merging small pension funds into ‘megafunds.’  This is a small, welcome step that should improve efficiency and allow funds to do more long-term investment. However, it’s small beer in comparison to very serious pensions crisis we are facing, with most people in this country looking forward to what can only be described as miserable retirements.

The causes of this are twofold. First, we are simply not saving enough, with one estimate being that as many as four in five people are saving too little to expect a decent income in retirement. Many in the industry are calling for mandatory pension savings rates to be lifted which would also boost potential investment by at least £10 billion pounds per year.

But these reforms would need to ensure that employers pay for most of this increase and the benefits are focussed on low- and middle-income people. Without a progressive reform, we risk replicating the current system, where the bottom half of the population have less than one per cent of pension assets and the wealthiest ten per cent have nearly two thirds.

The second – even bigger – problem is that the current rates of climate change and nature destruction will cause economic and financial destruction on a scale it’s hard to imagine. A recent analysis estimated that 3 degrees of warming – not far off the current impact of existing plans – would be equivalent to fighting a permanent domestic war. Yet UK pension funds have £300 billion of capital in companies with a high risk of driving deforestation, and £88bn in fossil fuel companies. At the same time, our pension funds are only investing 4% of their assets in climate solutions.

We have proposed a win-win agenda for the government, where pensions reform delivers decent incomes in retirement for all and a major boost to the UK economy and investment in the transition to a green, clean future: but this will require the government to significantly step up its ambition.

By Jesse Griffiths

Source:lbc.co.uk

Sophia Martinez

Print page

Comments:

comments powered by Disqus