NAO urges retirement savings action
Filed under: Pensions
The National Audit Office (NAO) raised concerns that there is no single joined-up programme to encourage people to save more for their later years.
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It warned of the "significant consequences" to the taxpayer of people living for longer, which will increase the burden of social and healthcare needs.
Projections for future spending on state pensions and pensioner benefits as a share of GDP may be "too optimistic", it said.
Spending on this sector rose from 5.5% of GDP in 1990 to 6.9% in 2011-12. Forecasts from the Office for Budget Responsibility (OBR) last year said that this spending will rise to 9.5% by 2061-62.
The Government expects that state pension reforms and its landmark programme to automatically place people into workplace pensions will reduce the potential long-term spending liability. Around eight million people are expected to save for the first time or save more because of automatic enrolment into workplace pensions, which has started with larger companies.
But in reality, the long-term costs for Government remain "highly uncertain", the report warned. An estimated 10.7 million people, equating to two-fifths of the working age population, are not saving enough to get the income they want to live comfortably on in their old age. But the NAO is concerned that without a "whole system view", there is a lack of coherence and accountability. This in turn creates a risk that the Government's efforts will not do enough to increase people's retirement savings.
TUC general secretary Frances O'Grady said: "This report shows that Government policies on retirement incomes are being mismanaged. But there are better ways to respond to an ageing society than cutting the state pension and forcing people to work for longer.
"Ministers can start by reforming the £40 billion pensions tax relief budget so that it's less skewed towards the very wealthy and provides a better savings incentive."
A Government spokesman said: "It is wrong to suggest that DWP and Treasury are not working effectively together. We are collaborating successfully to improve fairness, control costs for the long term and boost retirement saving. Our reform of the state pension system, changes to state pension age and automatic enrolment into workplace pensions are examples of our on-going strategic approach to pensions."