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Your employer may be no better, plugging money into private pension schemes that might otherwise have gone towards pay rises for younger employees. The pension deficit, or the amount that is needed to meet all the money promised, has reached almost £1 trillion. Employers don't have the cash to cut that deficit, so they're having to divert profits away from investing in younger staff."Because companies are not putting in capital, younger workers will have lower wage growth than they otherwise would," says David Blake, director of the Pensions Institute at the Cass Business School. "In that sense they are paying for the deficit. They don't realise they are, but that is what's happening."How did we get in this mess? People are living longer, giving them more voting power over the government. "Younger people might think this is not fair, but older voters will make sure that government taxes younger people to pay for their welfare," David says.Like buying a house, or getting the Tories out of government, pensions feel like yet another thing you might as well give up on
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That's just the state pension. In the private sector, companies struggling to close the pensions gap are switching from "defined benefit" pensions (where the employer commits to pay a defined amount to the worker in retirement) to "defined contribution" schemes (where your retirement pay depends on the contributions you and your employer have paid in). "You have a smaller base to grow the fund and much lower returns, so the pension pot built up will be much, much less," says David Blake. "But the employer won't care because they're not promising any benefits, you don't have any guaranteed benefits."So the government doesn't care and your employer doesn't either. "Governments don't really care about the future," Blake says. "Even the pensions ministers that I talk to, they're not interested. At a policy level, the government's trying to save the health service and stave off rail strikes. In 40 years, when young people will find themselves facing poverty in old age, they'll turn around and say, 'That's not our problem.'"Employers don't care because they're not promising any benefits.
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