Ten years after the Pensions Working Group was asked to come up with a formula for pensions, we are still no closer to a solution – as was clear from the speakers at the recent ifs-Malta conference.

The terms of reference were twofold: they had to be sustainable for the government which financed them; and they had to be adequate for the pensioner seeking to retain the lifestyle to which he had become accustomed while working.

For some time, the pensions model has been based on the World Bank’s three pillars: a state pension; an occupational pension; and private pensions.

This was based on the principle that the state has a duty to ensure a minimum standard of living – but what is ‘minimum’? Are we looking at a safety net to prevent people from falling into poverty or enough to ensure pensioners can still go out to eat and travel overseas?

And the private pension pillar is based on the concept that some people are in a fortunate enough position to be able to put even more aside – but who might need an incentive to do so. Why? Because it is in the government’s interest to have affluent pensioners, not a ‘burden’ on society in terms of benefits, but part of the motor that keeps the economy turning.

The devil, as they always remind us, is in the details.

Let us start with the adequacy of the state pillar. The UK pension is only 22 per cent of pensioners’ income. We are still aspiring to 67 per cent. And sustainability?

The UK spends eight per cent of GDP on pensions. We are spending over 10 per cent and the figure will go up to 16 per cent by 2060. Is the UK too miserly or are we too generous? Governments juggling finite resources would clearly like to shift the burden from the first pillar... but to whose shoulders?

It is still too early to decide whether the introduction of private pensions will prove to be a success – although the likelihood is that they will merely displace money from other savings products. But private pillar pensions are meant to be the cherry, not the cake.

Which brings us to the second pillar: occupational pensions. Should these be mandatory or voluntary? Should the employee choose how much he or she wants to give? And should the employer also contribute? For years, we were told that employers needed to juggle their own finite resources to keep their heads afloat and to bring more economic growth.

But potential providers of private pensions are anxious to get enough take-up to justify the investment they will have to make. They needed a solution which would help government shift that burden on to the shoulders of the pensioner-in-waiting without making it mandatory (a political bomb), and without asking employers to contribute (another political bomb). A solution presented at the conference was for the employee to be automatically enrolled in the scheme of his employers’ choosing, but with a choice to opt out, and without the employer actually forking out a cent of their own. In the UK only nine per cent bother to opt out.

Not quite an occupational scheme but one they hope will prove a politically (and economically) palatable one. At least until the time is ‘right’.

And for pensioners? Consider this, also presented at the conference. Person A puts aside €300 a month for 10 years, from age 22 to 32. Person B puts aside €300 a month for 30 years, from age 32 to 62. They would both end up with €285,000. Would they opt out if they understood the magic of compound interest? Is auto-enrolment a political cop-out giving in to commercial interests – or a feasible interim solution to prevent poverty from escalating?