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UK pension squeeze is on the way

A report by AXA has confirmed that the UK pension industry, despite having a difficult decade, is set for further trouble in the future. It would appear that more than three in five UK citizens are looking to rely upon the state pension as their main source of income in retirement, as the private pension sector continues to decline and more and more workers are withdrawing from pension schemes. So what next?

The very fact that around 64% of those in the UK will be looking to depend on the state pension is a damning indictment of the UK private pension sector. This is an area of the financial industry which was for many years seen as "money for nothing" but lately has been hit by various taxes from the UK government and regulatory changes which have increased short-term pension deficits. In truth, when Gordon Brown was in the Treasury he instigated a tax raid on UK pension schemes which brought significant funds into the UK government's coffers but, as we are seeing now, has had a detrimental long-term impact upon the sector.

While many people would prefer to see Gordon Brown reverse these taxes on private pension schemes, in many ways is too little too late and there are serious concerns that more pressure will be placed upon the state pension and UK benefit system, pressure which the government of the day will find very hard to cope with.

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