State subsidy to private pensions

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From the Guardian this morning:

John Hutton says taxpayers can no longer afford to support the pensions of state employees (Report, 8 October). Unfortunately, he misses an obvious point. As my recently published research has shown, in 2007-08, private pension funds in the UK received subsidies amounting to £37.6bn while paying pensions in that year of just £35bn to those in retirement. The result was that in that year every single penny of pensions paid in the UK were paid at direct cost to the UK taxpayer, and none in effect by anyone else. The question Hutton should therefore be asking is not whether pensions should be paid by taxpayers or not, but whether there is in fact any viable, working alternative to pensions being paid by taxpayers?

There is, but only if we change our understanding of pension funds so that they are not seen as savings pots and are instead seen as investment funds to be used to generate the future wealth which those anticipating retirement hope to enjoy in their old age. Hutton shows no understanding of this issue.

Richard Murphy

Director, Tax Research