Some causes of the problem are easily identified. Increased longevity has sharply raised the costs of pension provision. And ultra-low interest rates have further increased the notional costs of meeting the pensions promise. Companies saddled with defined benefit pensions struggle to compete with younger upstarts from the developing world. Globalisation is thus encouraging companies to abandon their wider social obligations in droves.  Yet these are not the main reasons for the precipitous decline in private pensions, as evidenced by a number of other advanced economies that have managed better to maintain an adequate system of privately funded retirement provision.  The bigger cause is rather that of excessive government interference and the steady erosion of tax and other incentives. There are few better examples of the law of unintended consequences than the propensity of successive governments to meddle in pensions. Most of this regulation was designed to address supposed weaknesses in the existing regime, but in practice it has succeeded only in undermining the whole edifice. Rewind to the heyday of the final salary pension, and you find that it was actually based on quite loose contractual arrangements between employer and beneficiary. Companies would use their “best endeavours” to meet their pension promise, but there was no obligation in the event of the sponsor falling on hard times. The pension was a perk to encourage skilled labour retention.  These arrangements began to change with the introduction of compulsory indexation, first of the frozen benefits of those leaving for alternative employment and later for all pension payments. There followed a steady reinforcement of the “rights” of beneficiaries, culminating in the utterly disastrous decision under Gordon Brown to make solvent sponsors who chose to walk away from their pension promise liable for the full buy-out value of the pension. Finance directors took one look and voted with their feet.  When the pensions regulator started forcing companies to prioritise the paying down of pension deficits over dividend payments, it was the final straw. For many companies, it was as though they were being required to work solely for the benefit of past and future pensioners. Removal of pension tax breaks for high earners has encouraged those who make corporate decisions further to downgrade pension provision. Space constraints prevent me from listing in full the calamitous series of policy blunders that destroyed the private pensions sector, but no article on pensions “reform” would be complete without special mention of Mr Brown’s act of pensions vandalism, when he removed the tax credit on dividends to help fund public spending. Without the abolition of this tax break, many funds would still be in surplus.  Overlaying this attack on the “voluntary” nature of pensions provision was a political culture of economic interference that sought to prioritise employee protections and short-term consumerism over long-term investment and saving.  As far as private pensions are concerned, we’ve paradoxically ended up with one of the most socially inequitable systems in the world – a kind of gated but fast-declining community of private sector workers whose pension promise is fully protected, and the growing majority of slum-dwellers outside, with either no pension pot or one where the risk lies entirely with the employee.  In fighting the downturn with quantitative easing and negative real interest rates, public policy has further conspired to undermine pension savings by significantly increasing the costs of buying an annuity.  It may already be too late to repair the damage from more than 30 years of well-meaning but disastrously piecemeal pensions reform. Yet all hope is not lost. The Association of Consulting Actuaries survey shows remarkably strong support among employers for some degree of risk sharing in pension provision, provided the right incentives are put in place. A good starting point would be to sweep away the entire panoply of accumulated pension “protections” and begin again.
Ministerial meddling and tax raids have created a crisis – yet all hope is not    lost.