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If you’re old enough to remember when the common consensus was that pensions were boring, you may be fortunate enough to avoid the major changes the government will be making to pensions soon. However, if you’re too young to even be thinking about pensions, you will be the ones hit hardest. This is extremely unfair and this news will hit those people like a ton of bricks when they figure out what is happening.

Politics and contract law will stop older workers from being dragged under the waves of the financial storm which is certain to claim many casualties. Yet children still attending school are the ones who will have to pay higher rates of taxes in the future to take care of public sector pensions that are not funded. The reason why older workers will be protected is because the law states that any benefits already promised to workers cannot be taken away.

Even more galling is the fact that only £4 billion of the £18 billion that public sector pensions cost will end up in the hands of pensioners. Those at work will receive the rest through liabilities or the aforementioned guaranteed benefits. Naturally, Britain’s politicians have elected to follow the age old rule of giving the bad news to those who are unlikely to notice until it’s too late. In this instance, the young have been chosen as the sacrificial lambs.

This means that we will see the end of accrual rates for public sector pensions in the future or else those on pension schemes will be forced to make higher contributions. Also, as a means of reducing the huge pension deficits that have appeared,  pension tax relief may also be shelved or at least cut for those who will be saving for pensions in the future no matter where they work. Simply put, the current government is going to make it harder for younger workers to save for their pensions because they cannot currently afford to pay for the wildly generous pension plans of older workers.

Nick Clegg, Deputy Prime Minister, has already declared that the government will be acting soon. According to Mr. Clegg, the fact that private sector workers have seen their final salary schemes disintegrate and their defined contribution schemes decrease in value means that it is unfair to ask them to pay their taxes to keep excessively generous public sector pensions afloat. He also said that pensions spending could double in five years if something drastic isn’t done.

The fact that the gap between public and private sector provisions is getting too big is something that has been known by financial experts for decades as has the fact that Britons have not been saving enough to make up for their increasing longevity. Interest rates have been on a long and steady decline which has seen annuity income from private sector pension schemes halve in value.

All of this has been exacerbated by the fall in the stock market. MP’s and public sector workers have had their head in the sand and failed to help the situation. Rather than alleviating the problem, the government raised taxes on pensions. Over ten years ago the gap between public and private provisions was seen as being too large. Though this gap may close in the future, the gap between young and old seems certain to widen exponentially.

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