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'GOVERNMENT PENSION POLICY IS UNRAVELLING'

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The government's current pensions policy is at risk of unravelling, according to a report launched today by IPPR, t...
The government's current pensions policy is at risk of unravelling, according to a report launched today by IPPR, the UK's leading centre-left think tank.

The complexity and cost of the proposed pension credit and doubts over whether stakeholder pensions will reach their target group seriously threaten the sustainability of the current settlement. The report raises fundamental questions about the role of the basic state pension, the long-term future of the pension credit and the consequences of a majority of the population being means-tested in retirement.

In the interim report of IPPR's work into pensions and long term care policy, the government's record on both areas of policy is assessed. As well as concerns over pensions' policy, the report also highlights that the government's long-term care policy is problematic. In particular, it raises doubts over the feasibility of putting into practice the proposed divide between personal and nursing care.

Clarity over what individuals need to provide for themselves and what the state will provide is needed if any settlement for retirement is to be sustainable. The report suggests that this clarity does not currently exist and that a reappraisal of policy across pensions and long-term care is required.

A number of incremental and fundamental policy options are put forward for debate, including:

* Addressing the 'advice vacuum' for pensions, particularly on the question of whether to opt in or out of the state second pension

* Raising the basic state pension whilst phasing in a higher official retirement age

* Incorporating 'early warning' elements into the long-term care assessment tool to trigger preventative measures

* Introducing further compulsion for funded private pensions or for long-term care insurance

Over the next six months, IPPR is undertaking further work to inform policy development in this area. This will involve:

* Attitudinal work with individuals to assess their capacity and inclination to plan, perceptions of means-testing and views of inheritance

* Modelling and costing alternative policy options from the perspective of both the individual and the state

* New thinking on the impact of changing health status and on what innovations in products the financial services could offer

IPPR will publish their final report on A New Contract for Retirement early in 2002.

NOTE

A New Contract for Retirement: an Interim Report is available on the IPPR websiteor from the IPPR on 020 7470 6100.

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