In typical intemperate style, Neil Kinnock once warned voters not to get old if the Tories were elected. He might with more justification have given that warning seven years ago when his own party came to power. On Tony Blair’s watch, but largely thanks to Gordon Brown, confidence in pensions has been shattered and the government is mired in a self-inflicted crisis. Yet you can guarantee that the next time the prime minister reels off Labour’s achievements in the Commons he will not mention one of its most significant accomplishments — the destruction of a once-successful pensions system.

Britain’s company pensions were the envy of the world. There was more invested in occupational schemes than in all the rest of Europe combined. Everyone knew that state pensions were not generous, but at least they would not bankrupt the state. People also knew that a decent retirement income depended on saving enough cash. The state might provide a safety net, but not enough for a decent lifestyle. That was the core of the post-war pensions settlement, the rise of occupational schemes alongside the Beveridge welfare state. All that has now been fractured. The proportion of firms offering final-salary schemes has halved and the alternatives are far less attractive.

One of the chancellor’s first actions was the £5 billion annual raid on pension funds by abolishing the dividend tax credit. He thought nobody would notice for 25 or 30 years. In doing so Mr Brown displayed a contempt for pension funds and their members. The prime minister, who we know from his former adviser does not have the firmest grasp of economics, once said the effects on pension funds of the raid had been more than cancelled out by the stock market’s rise. But shares in Britain are only a whisker higher now than they were seven years ago. They have performed terribly in comparison with other markets. Some of this is a direct result of Mr Brown’s meddling.

That intervention would be bad enough on its own but the chancellor has compounded it with other actions. One of the government’s early internal battles was over means-testing. The estimable Frank Field, given the task of reforming welfare by the prime minister, argued strongly against any extension of means-testing. But he was overruled by the chancellor, whose minimum income guarantee and pension credit were built on the means-testing principle. The result is that half the population — typically those low-income earners who Labour was supposed to help — have no incentive to save.

New Labour has a simple message for savers: be prudent and frugal and we will penalise you. Your feckless neighbour, however, will get the full range of government help. Whether it be with failed stakeholder pensions or reducing tax advantages of individual savings accounts (Isas), the chancellor has left a trail of destruction through the savings culture. No wonder so many have sought refuge in the fool’s gold of an over-inflated housing market. The incentive to save has been damaged and another perverse incentive put in its place: better to work in the public sector. Civil servants and other government employees are among the few to enjoy index-linked final-salary schemes, all at an escalating cost to taxpayers.

The current policy is not sustainable. Mr Brown’s pension credit will eventually prove to be unaffordable and, as Mr Field predicts, will be abandoned by a future government. Pensions are high up the political agenda and will climb further. Nine out of 10 pensioners vote compared with fewer than 40% of 18 to 24-year-olds and the country is getting older. Restoring the dividend tax credit would be a better use of public money than much of the government’s wasteful spending.

Means-testing has to be reined back and genuine savings incentives restored. Voters have to be persuaded that a more generous state pension can be afforded only if people are prepared to retire later.

Above all, Mr Blair and Alan Johnson, his new work and pensions secretary, have to wrest pensions out of the chancellor’s grip. Too much damage has been done already.