Lack of private sector pensions will cost tax payer billions says UNISON

UNISON, the UK’s largest union, has called on the government to deal with the real pensions crisis - the alarming lack of private sector pension provision that will place a colossal burden onto the taxpayer. A shocking two-thirds of private sector employees – 15 million workers - are not in a workplace pension to which their employer contributes. This could mean they are forced to rely on benefit top ups paid for by the taxpayer when they retire. UNISON figures reveal that every worker locked out of saving for their retirement costs the taxpayer £15,000 – meaning a potential extra benefit bill running into hundreds of billions of pounds. The union is calling for decent pensions for all workers – in both public and private sectors. It also highlighted recent studies that have shown decisively that public sector schemes are affordable and sustainable for the long term. Dave Prentis, UNISON General Secretary, said: “It is shocking that two thirds of private sector workers are not in a workplace pension to which their employer contributes. These companies are shirking their responsibilities to their workers, pushing the burden onto the taxpayer. For every worker locked out of saving for their retirement, the taxpayer could get stung for billions more in benefit payments. “But instead of dealing with skinflint employers, the government shamelessly uses the lack of private sector pensions as a stick to beat public sector workers with. The latest round of attacks on public sector pensions is based on myths and ideology. Research by independent experts such as the Institute for Fiscal Studies (IFS) and the Chartered Institute of Public Finance and Accountancy (CIPFA) prove the schemes are affordable and sustainable for the long-term. “And the government’s plans to auto-enrole workers into the NEST scheme will not go far enough. Unless we bring all pensions up to a decent level, we are running the risk of condemning a generation of people into poverty in their retirement – and a huge burden on the taxpayer.” *The possible cost to the taxpayer is over £15,000 for each worker that reaches retirement with just the state pension to rely on. This is based on the following calculation:
• For a single person, the Guaranteed Credit element of the Pension Credit is £132.60 a week.
• According to the “Interim Life Tables” produced by National Statistics, a male aged 65 today could reasonably expect to live for another 17.5 years – i.e. to 82.5.
• The average weekly state pension in payment (i.e. Basic State Pension plus S2P etc) in 08/09 was £116 a week.
This means that if everything remained constant and a person reached SPA with no or very limited private pension savings and an “average” state pension , the cost to the taxpayer of paying Pension Credit at a rate of £16.60 a week for the next 17.5 years would be £15,106 (i.e. 16.60* 52) * 17.5.