It is rarely talked about, but it is a far more serious looming crisis than most issues that make it on to the front pages. Today’s release of the unsexily entitled Households Below Average Income data from DWP reveal that pensioner poverty has scarcely reduced at all over the last decade, and it is now in the credit crunch sharply getting worse. The UK single person State pension, at just 18% of average earnings, is already one of the lowest in Europe where the average is proportionately three times higher at 57%. Official figures confirm that more than 2 million people over 65 in the UK live in poverty (i.e. their total income is less than 60% of the average income). What makes this even more disturbing is that four-fifths of pensioners in this country rely on some form of savings to supplement their pension, and these savings have been decimated by the credit crunch. A year ago the average pensioner couple drew 33% of their income from savings; that is now down to only 5%. Two lessons stand out from this bleak picture. One is the gigantic chasm now between top and bottom pensions, and the other is the fundamental inability of the private sector to guarantee decent pensions for all.

The contrast between rich and poor is even greater in pensions, by far, than in working incomes where inequality is now greater than at any time under Thatcher. While the State pension for a single person is now £92 a week, for Sir Fred Goodwin of RBS fame it’s a staggering £13,520 a week – 147 times more. Nor is Goodwin at the top of the pile either. Jeroen van der Veer, chief executive of Shell, has accrued a pension of £22,870 a week, and the boss of Cadbury Schweppes, Todd Stitzer, makes do with £28,385 a week. These grotesque inequalities in retirement incomes have at least now been shaved a bit by the Budget ending of higher rate tax relief for the richest earners. Hitherto higher rate taxpayers (only 10% of the population) claimed no less than 55% of the £19bn paid each year by the Exchequer to subsidise pensions. But one has to ask why should some of the richest people in the country get any subsidy from the taxpayer for their pension at all when 2 million people, despite having paid national insurance contributions all their working lives to fund their pensions, still end up with retirement income below the poverty line.
The other point that is now coming home to roost is that the private pensions industry, wholly dependent on the stockmarket to maintain its funded pensions, cannot guarantee an adequate pension when the market falls. This has been aggravated further by New Labour’s privatising instinct to shift more pension provision into the private sector, not least because it continued Thatcher’s policy of allowing the real value of the State pension to continue to fall year by year. Now that the stockmarket fall has wiped billions off the value of pension funds, some 300 occupational schemes are now seeking a bail-out from the Pension Protection Fund, the State-provided safety net.
What is needed is a fundamental restructuring of the whole pensions landscape. A universal State scheme should be set up which builds a second earnings-related pension on top of the basic State pension, which would provide a combined pension for everyone above the poverty line. It would guarantee, over a steady 20-year build-up, an adequate income in retirement for all, and it would not of course prevent anyone from supplementing it with investment in any private scheme on top. The restoration of pensions (and housing) as a major public service is a vision that this country now sorely needs.

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