Publication The Ageing Population, Pensions and Wealth Creation

Executive Summary

Tomorrow’s Company published a report in June 2004 – ‘Restoring Trust – an inquiry into the effectiveness of the UK investment system’ – which was authored by an Inquiry Team made up of representatives from across the financial services industry. Following on from this, Tomorrow’s Company has undertaken this short study which examines some of the issues raised in the First Report of the Independent Pensions Commission, but placed within a wider social and economic context.

In this report, we challenge the assumptions that have created a sense of crisis. We encourage others to widen the horizon of the debate and also to challenge those assumptions. There is no ageing crisis. As a society we can afford to grow old. Rising productivity can outweigh any negative impact on living standards arising from an ageing population.

The shift from defined benefit schemes, together with the generally lower rates of employer contribution to defined contribution schemes has rapidly shifted the risk of pension provision from companies to individuals. As time unfolds, the role of companies in pension provision will decline substantially. However, companies will continue to be the underlying source of pensioners’ incomes in real terms. This is because the prosperity of the country in future years, and hence its ability to afford pensions that provide a reasonable standard of living, will be a function of the wealth creating capability of industry.