This article was written by Vince Cable and appeared in today’s Mail on Sunday 

We are told that an Age of Austerity is coming – but many pensioners are there already. Millions depend on the state pension which – at £4,953 a year for a single person and £7,920 for a couple – is well below the annual equivalent of the minimum wage (a little more than £10,000 a year) and below the official poverty level.

More than half – 55 per cent – of all pensioners are on sufficiently low income that they are eligible for means-tested pension and council tax credit.

Many who are entitled do not, however, claim as they can’t find their way through the bureaucratic maze, or for reasons of pride. And millions of pensioners have suffered a loss of income from bank deposits or devalued private pensions.

Women in particular are used to austerity. They retire earlier and live longer so often have to survive for longer on a state pension or benefits.

Years spent bringing up a family mean many do not have full pensions. And, shockingly, 1.5 million women have no state pension because they do not qualify – usually those who were dependent on a husband’s contributions, but who separated in middle age.

Women would also be the biggest casualties of Shadow Chancellor George Osborne’s attack on the state pension, announced last week. He wants women’s retirement age to rise by six years by 2020.

This turns their retirement planning upside down. Many people work simply to get by and are exhausted by heavy manual labour. And for those without secure jobs, there is the prospect of having to live off savings until the pension kicks in.

The current position is that the state pension age for men will rise from 65 to 66 in 2026, while the pension age for women will rise gradually to 63 in 2016, 65 in 2020 and 66 in 2026.

It is right and necessary to postpone the official retirement age since the population is growing older and living much longer. Any proposal to shorten the timescale, however, needs to be very carefully planned and based on an agreement between political parties, since by 2016 there could have been two changes in government, or three by 2020.

It is clear that Mr Osborne’s proposal involved little thought and no consultation with colleagues.

We must reduce government borrowing to restore the public finances to health. The public will understand if future austerity is shared fairly with the biggest shoulders carrying the biggest load. That isn’t true now, and it would be even worse under Mr Osborne’s proposal.

Young civil servants recruited only a few years ago look forward to a full pension at age 60 as far away as 2045, while people on low or average pay will have to work longer for a modest pension.

A growing gulf is opening up in the public sector between the gold-plated, index-linked pensions of top civil service mandarins, quango bosses, judges, Ministers and MPs, and the inadequate state pension.

In the private sector there is a similar gulf between bosses sitting on a generous pension pot – subsidised, with higher rate tax relief, by other taxpayers – and the remainder of the workforce with a poor occupational pensions or none at all.

Only a handful of companies now offer defined benefit pension schemes to new employees. So, what should be done? How can the needs of pensioners and our sense of fairness be reconciled with the problems of the wider economy?

Later retirement is clearly part of the story, if properly managed. Many will want to retire later voluntarily if their pensions are protected and provided they do not face barriers of age discrimination.

We must stop compulsory retirement at 65. I wrote recently about how ‘silver power’ could help drive the economy forward. These older workers would pay taxes, save more and provide scarce skills.

But for those dependent on a state pension, the link between that and earnings has to be restored now. The Government plans a link at 2015 but, by then, three million pensioners will have died, many in poverty.

As long as a decent state pension is deferred, more are sucked into means testing. And the effect of means-tested pension credit is to discourage saving. Why bother to save if the Government is going to help those without savings and withdraw benefit from those with them? It must pay to save.

Because of the trap of means testing, the Government’s new Personal Account pension saving scheme, with four per cent automatic deduction from everyone’s wages, risks becoming a major mis-selling scandal.

Women around 50 are most at risk. For many the money will go straight down the pan because of means-tested pension credit.

Any improved pension system has to be paid for. That is why public-sector pensions need reform. Existing public-sector pensions and accruals must be honoured. But unfunded state schemes cannot continue to rely on massive taxpayer subsidies.

The MPs’ scheme, which has a massive (26 per cent of salary) contribution from the employer – you – is a good place to start. When Parliament resumes this week, we shall see how much real appetite there is for a fair sharing of Britain’s pension burden.

Liberal Democrat Shadow Chancellor, Vince Cable