It is almost axiomatic that when the bureaucracy touches pensions, the result is legislation of bewildering complexity. This is what will happen in April when the state earnings related pension scheme (SERPS) is rebranded the state second pension (S2P). And a year from now, the new 'pensions credit' will means-test the state pension. The sometimes weird, but always fiendish detail is probably fully understood only by a handful of civil servants - who will quickly forget it when they rotate to the next department of state.

The British have not had a pension strategy since the 1950s - hence the jibes that the government makes it up as it goes along. As with our railways, policymakers seem bedevilled by chronic indecision. This is slightly unfair - in the last few years, there has been a clear policy intent to retarget the state pension at the lower paid.

There is undeniable logic to what the government is doing - it is surely a proper role of government to deliver a defined benefit pension to people who have a low risk tolerance. The unpredictability of defined contribution makes it unsuitable for the poor. Dickens put it more elegantly: 'Annual income £20, annual expenditure £19 19/6d, the result happiness. Annual income £20, annual expenditure £20 0/6d, the result misery.'

The government is keen to boast of the UK's low spend on state pensions. It is already the lowest in the European Union (half the EU average, at just 5% of GDP). In spite of our adverse demographics, we are the only member state where the spend is expected to fall over the next few decades. Some boast!

Like families that only reluctantly mention the miser amongst them, the continentals rarely refer to the British cheapskate approach to pensions. And with good reason - we have failed to make cheap labour costs a competitive advantage. Yet this failure is easy to explain. To be sure, our spend on state pensions is half the EU average, but all that is happening is that the half of the UK workforce who are not in tax-subsidised occupational pension schemes are losing out. On pensions as a whole, public and private together, we spend roughly the EU average.

There are potentially profound societal implicationsof this division into haves and havenots.Worryingly, it always seems to be the next government's problem. Suppose we did have a grand design. What would it look like? The 'to fund or not to fund' debate is a sideshow. But do not underestimate the politics - supporters of funding often seem more motivated by a desire to build huge piles of investments than how to deliver a no-frills state pension in the most efficient way.

It cannot be repeated enough that prefunding the state pension does not magically make it more sustainable. No matter how cleverly the economic cake is cut, a country's economic production in any year is consumed by the people who are then alive. The issue is how different generations lay claim to each year's production. (And pre-funding does not even guarantee payment - as irate Argentinians have just discovered. To stop a run on the banks, their government has said it will unilaterally convert all bank deposits made by pension funds into government debt.)

An emerging model in many countries is a core defined benefit (DB) pension with individual defined contributions (DC) accounts on top. The Germans are the most recent to embrace this. From 2008, UK-style personal pensions will be available to which individuals can contribute a tax-deductible 4% of pay.

At the beginning of this decade, the Swedes introduced a state system that is genuinely innovative. Under its DB core, each Swede has an individual account to which 16% of their pay is credited each year. This account is revalued by wage inflation. Then there is a DC top-up, to which 2.5% of pay is paid.

The Swedes have been pragmatic about the design of their DC arrangement, constructing a sensible public/private partnership. Keen to avoid the high costs of administering individual DC accounts in the UK and other countries, the Swedes set up a publicly-owned clearing house. It negotiates charges with in excess of 80 investment managers, collects contributions, pays them to the managers, and maintains records.

In the UK, stakeholder pensions have been sniped at and labelled a flop - in the first eight months since their launch 'just' 570,000 were bought. The snipers miss two points. For the first time, the British have a long-term savings vehicle that is cheap. It is no exaggeration that, before stakeholder, commission and other costs more or less cancelled out the tax-relief. Second, there is a very good reason why the poor are not buying more pension provision - they have no money to save.

It is easy to argue that government's role in pension provision should be limited to providing a low quality pension and the creation of a savings environment in which people can reliably plan. But real life is not so simple. The reason for the periodic revisiting of UK public policy on pensions is that in the UK, much more than on the continent and in North America, the poor are excluded.

It must be a pretty good bet that, by the end of the decade, Whitehall will be back from the drawing board with a proposition that, just as everyone must pay taxes, each of us must contribute to an individual DC savings account.

John Shuttleworth is an actuarial partner at PricewaterhouseCoopers.