Threat of pensions crisis downplayed

Fears of a looming pensions crisis in the UK are extremely premature, a new report suggests.

13:14 31 October 2005

Fears of a looming pensions crisis in the UK are extremely premature, a new report suggests.

Despite concerns that a declining birth rate and increasing life expectancy will lead to a major pensions shortfall, a report by business thinktank Tomorrow's Company suggests that this will be offset by an increase in workforce productivity.

It estimates that UK workers will be twice as productive by 2041 as they are at present, enabling the economy to deal with the predicted increase in the number of pensioners.

"There is no ageing crisis. As a society we can afford to grow old," said Philip Sadler, one of the authors of the report.

"Rising productivity will outweigh any negative influence on living standards from an ageing population."

He added that the government's 'old age support ratio', which forecasts a major increase in the proportion of dependents to workers, fails to take into account the large number of working-age Britons who at present do not contribute to the economy.

With the proportion of work-age adults in productive employment set to rise, the report suggests that the actual ratio of workers to dependents will remain fairly stable over the next 35 years.

Work and pensions secretary David Blunkett warned earlier this year that Britain will face a major pensions shortfall unless drastic reforms are undertaken.

The government-appointed Pensions Commission is due to publish a major report into pensions reforms next month, which is expected to focus on the need for greater private saving and call on workers to work beyond the age of 65 in order to prevent a predicted pensions shortfall.