MANY constituents are writing to me about problems with their pension funds, such as Equitable Life.

The news that a penny could be put on to the cost of a postage stamp, to finance the shortfall in the Royal Mail pension fund, is another reminder of the growing problems in the pension sector. Buckinghamshire residents are already fully aware of the difficulties with the county council pension scheme, in common with many others.

Some years ago, 70 per cent of the population in Britain had some form of private sector pension scheme. That was much bigger than any other country. Elsewhere in Europe, pension schemes tend to be "pay as you go", financed by high employment taxes. This has resulted in economic stagnation and growing taxation to pay for the ageing population.

In Britain, most private sector pension schemes used to be "final salary". In the last five years, many of these schemes have closed to new entrants. We are in the middle of immense changes. The Labour Government imposed a £5 billion a year pension tax after 1997, which increased the costs to the final salary schemes. Coupled with the falling market in stocks and shares, many company pension schemes are facing deficits, not surpluses.

People starting out on their working life are finding that companies are now having to run "replacement money purchase" occupational pension schemes. The level of contributions to these schemes have been roughly halved. These money purchase schemes have also been hit by the falls in the stock market. The falls in the UK have been sharper than in the USA. Many commentators ascribe this to current Government policies which have increased the tax burden and red tape imposed on business the "engine" of our economy.

The long term result is likely to be that the generation approaching retirement and subsequent generations will have noticeably lower pensions than those who are already retired. Measures need to be put in place to reverse this downwards spiral. New proposals for pension credits seem unlikely to encourage people who are not already saving to start up a pension fund. The Government has got to reverse its policies on pension funds, urgently.

Cheryl Gillan, MP

Chesham and Amersham

January 24, 2003 11:00