Plugging the Gap: How Employers can help to fill the Pensions Deficit

By Robin Blackburn

UK Pension Commission has argued that, if present trends continue, there will be a shortfall in pension provision equivalent to 4 per cent of GDP by 2050.

The government has signalled that it is no longer committed to the strategy it elaborated in 1998 and it has called for a debate on the measures necessary to ensure the long-run adequacy of retirement provision.

The TUC has argued that the key to solving the pension crisis is to restore the employers' contribution to pension funding. This paper outlines a radical proposal for achieving this end - the institution of an asset levy under which new shares, calculated at 10 per cent of profits annually, would be issued to Pension Reserve Funds to set up a claim on future dividends and supply a new layer of provision to all. It is calculated that the total Reserve Funds would be worth £1 trillion by 2031 and that it would generate an income of £40 billion annually, enough to plug more than half of the deficit identified by the Pension Commission.

A Catalyst Working Paper Published: June 2005