On average we are living longer, but worry and confusion over pensions has turned what should be a good news story into a bad news story.

‘Savings gaps’, ‘black holes’ and fear people will have to work till they drop are myths argues a report from Tomorrow’s Company, an independent business-led think thank, which challenges the assumptions that have created a ‘pensions crisis’

Rising productivity will offset the effects of an ageing population and make a decent universal state pension practical, argues the think tank.

As a society we can afford to grow, says the report and the key is to pursue economic policies that promote productivity, growth and wealth creation rather than address a savings gap.

Philip Sadler, one of the report’s authors, said: "There is no ageing crisis. As a society we can afford to grow old. Rising productivity will outweigh any negative influence on living standards from an ageing population."

In particular, the report says that:

• Terms such as "support" and "dependence" can be seriously misleading; rather than estimate what resources might be required to provide a decent pension by comparing the number of people over 65 with the number of people of working age, it makes much more sense to compare the number of people in work with the number of people who are not working; this total economic support ratio is unlikely to be greatly different in 2041 than it was in 1961.
• More saving is not the simple solution it is often said to be; savings do not automatically translate into more productive investment; excess saving can depress the economic growth essential to financing pensions
• People should be free to work longer but this, too, is not necessarily a simple solution; it is uncertain how great the demand for older workers will be.
• The key issue is productivity; if productivity grows at even 1.75 per cent per year, lower than recent trends, the average British worker will produce twice as much goods and services in 2045 as now; this makes any plausible change in the total economic dependency ratio easily manageable.