Pensions policy must consider intergenerational fairness

The Institute and Faculty of Actuaries (IFoA) has today (31 May) published the second bulletin in its series on intergenerational fairness. In this bulletin, the IFoA has brought together a distinguished group of experts in the pensions field to discuss some of the key social, political and economic issues around retirement.

The pensions system needs to be affordable in the long-term and it’s important that no-one is left in poverty now, and in the future. The current older generation is the wealthiest the UK has seen in retirement and projections show that the younger generation is unlikely to receive the same generous benefits. This is particularly the case as the status quo in occupational pensions shifts from defined benefit to less generous defined contribution schemes.

Colin Wilson, IFoA President, said:

“We believe intergenerational fairness is at the very core of the debate around pensions. The ultimate goal is to create a framework that provides a financially sustainable life in retirement for all. But the answer is not straightforward. The range of views reflected in this bulletin help to explain the complexity of the pensions problem and the challenge for policymakers trying to find the best solution.

“As actuaries with a focus on long-term risk and reward, we want to help drive this debate and contribute in a meaningful way. In order to ensure that everyone benefits from the system, there is a clear need to review current policies like the pensions triple-lock, the state pension age and the transition from defined benefit to defined contribution schemes, through the lens of intergenerational fairness.”

Lord David Willetts, Chair of the Resolution Foundation’s Intergenerational Commission, said:

“The pensions divide should not be seen as a war between generations. But there are huge differences between the kind of pensions offered to the baby boomers and the far less generous schemes available to younger workers, which has a big effect on the kind of living standards people can expect in retirement. Pensions are at the heart of the intergenerational contract and we need to ensure we get the balance between the generations right”.

IFoA will be holding an event to launch the bulletin today (31 May) at Staple Inn Hall, High Holborn, London, WC1V 7QJ. Our panel of thought leaders will discuss the risks posed by not considering long-term implications of current pensions policy and the potential consequences for different generations.

Speakers include:

• Lord David Willetts, Chair of the Resolution Foundation’s Intergenerational Commission
• Sally West, Policy Manager, Age UK
• Andy Hood, Senior Research Economist, Institute for Fiscal Studies
• Dean Hochlaf, Assistant Economist, ILC UK

The next edition of the Intergenerational Fairness Bulletin will focus on the funding of health and care services.