What is the Pensions Crisis?

We constantly read stories in the media about our ageing population and the consequent pensions crisis.

The 'crisis' has been caused by a combination of longer life expectancy and falling stock market returns. This has resulted in there not being enough money stored in pension funds to guarantee a comfortable retirement for people who are currently at work.

The UK population is set to increase gradually from 59.2 million in 2002 to 64.8 million by 2031. The average (mean) age of the population is also set to rise from 39.3 in 2002 to 43.6 by 2031.The number of people over retirement age is projected to rise by 11.9 per cent, from 10.9 million in 2002 to 12.2 million in 2011. Simply put, we live in a country which will have more older people who will live for longer.

If you are currently in employment and want to find out how much you need to save to ensure your pension is adequate use The Guardian's pensions calculator.

The way forward
Help the Aged believes that the way forward out of the pensions crisis is as follows:

• People should be entitled to expect a decent income in retirement, funded both by tax/National Insurance and investment products (so spreading risk between two funding techniques) and with a target level of 60 per cent of average earnings.
• There must be a solid and dependable triangular relationship between government, the employer and the working citizen in which both rights and responsibilities are clearly communicated, understood and upheld.
• An independent pension authority should exist to supervise this relationship and remove it from the 'short termism' of the political environment.
• All working citizens should expect to pay more for decent pensions and should be compelled to do so on an income-related scale. Employers must contribute too.
• Social security benefits should be reserved for small groups with special needs. The mainstream should not need this support.
• More working (and contributing) years will be necessary in an ageing society but this should be achieved by choice. The concept of fixed retirement and pension ages must be examined.
• Age discrimination must be vigorously attacked, not least in the workplace, and, in setting working patterns and retraining employment practices, must be transformed, to encourage older workers.

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What is pensioner poverty?

The UK is the world's fourth richest country yet more than two million pensioners live below the poverty line. The older you are the greater your chances of living in poverty and this lack of income can have even wider ranging effects - with poverty closely linked to ill health, disability and lower life expectancy.

Increase the State Pension to the a 'decency' level
The basic State Pension (SP) is £79.60 for a single person and £127.25 for a couple. Help the Aged believes that the SP should be set at the minimum 'decency' level necessary to meet essential needs.

Research from the Family Budget Unit into income needs has shown that to pay for the basic requirements of a healthy, palatable diet, adequate heating and transport, a single pensioner requires an income of £99-£125 a week.

Help the Aged believes that increasing the SP in line with earnings is the fairest and simplest way to lift pensioners out of poverty.

Pension Credit, the Government's flagship benefit for older people goes some way towards addressing this but not far enough. The downside is that the new Credit is 'ferociously difficult to understand'.

The positives of Pension Credit are that it provides £2bn more for pensioners over 65 and Help the Aged will be encouraging as many older people as possible to claim the money to which they are entitled. (Read Can You Claim It? (PDF) to find out if you're entitled to Pension Credit).