The future standard of living is worrying

Britons are chronically "under pensioned" according to the Institute of Directors (IOD) and have not saved enough to pay for the sort of lifestyle they expect in retirement.

The IOD blames the looming pension crisis on inadequate savings, falling stock markets, and lower rates of return based on the fact that people are living longer.

What is more, the IOD lays part of the blame at the door of the government for its decision back in 1997 to remove tax credits on share dividends.

There is an estimated �27bn shortfall between what people have saved and what they expect to live on in retirement.

We doubt the Government recognises the scale of the problem, we doubt if they recognise that there is indeed a pensions crisis Ruth Lea head of the IOD policy unit

However, the IOD rejected calls for compulsory employer contributions into their employee pension schemes in its response to the government's green paper on the future of UK pensions .

At present, firms that employ four or more employees have to offer access to a pension but are not compelled to contribute.

Bare minimum

The IOD said that if employers were forced to pay into their employee pension schemes this would be an additional cost burden and could lead to "levelling down" with some companies now paying substantial sums deciding to reduce contributions to a bare minimum.

Ruth Lea also said she doubted raising the retirement age would solve the crisis. The introduction of incentives to persuade people to work longer was a key green paper proposal.

Instead, the IOD called on the government to restore the tax credit on share dividends and to introduce measures to boost savings.

"We doubt the government recognises the scale of the problem, we doubt if they recognise that there is indeed a pensions crisis," Ms Lea said.

'Out of touch'

In response Derek Simpson, General Secretary of trade union Amicus told BBC News Online that the IOD was indulging in "the economics of the madhouse."

Mr Simpson said that the IOD was wrong to conclude that the introduction of compulsory employer pension contributions would backfire.

"We heard a similiar arguement at the time of the introduction of the minimum wage. To suggest that all firms will cut back contributions to the bare minimum is a smokescreen and out of touch with the real world," Mr Simpson said.