David Prosser: Blair, Howard and Kennedy: the pensions crisis ostriches
Saturday 16 April 2005
"Forward not back" is a long way from being the first phrase that springs to mind when studying Labour's pensions policy.
"Forward not back" is a long way from being the first phrase that springs to mind when studying Labour's pensions policy. And I'm very definitely not thinking what the Conservatives are thinking about long-term savings. In fact, this week's election manifestos are remarkably similar in one key respect. All lack a clear strategy for solving Britain's startling pensions crisis.
It's an irresponsible omission. The problems older people currently face - low state pensions and failing company pension schemes, for example - will seem like mere trifles unless we start planning ahead for the next few generations of pensioners.
The ratio of the number of working people (paying tax and National Insurance) to pensioners is due to fall from four to one today, to two to one by 2050. But while it is clear the already creaking state pensions system will not be able to take twice the strain, there is no sign of individuals helping themselves. The Association of British Insurers says Britons are still £27bn a year short of the savings they should be making each year.
Yet no party is prepared to take action. After eight years in government, the best Labour can offer is: "We need to forge a national consensus [on pensions]." In the meantime, Labour has conveniently deferred difficult questions on pensions until after the election. Don't expect anything better from the Conservatives. They promise to restore the link between rises in the basic state pension and increases in national average earnings - a tie abolished in the Eighties by Margaret Thatcher. But their only real private pension initiative is to allow employers to do more to promote occupational schemes.
Equally, while Michael Howard and Oliver Letwin have been two of the biggest critics of Gordon Brown's £5bn-a-year raid on occupational pension funds, the Conservative manifesto is remarkably quiet on the question of restoring the tax break abolished by the Chancellor in 1997.
The Liberal Democrats' flagship policy is a citizen's pension, which all British residents would get, irrespective of their National Insurance contributions. It's an idea that has some support in all the parties, but improved state benefits can only ever be a partial solution to the crisis.
As the population ages, we will all be confronted with unpalatable choices. The first installment of the Government-commissioned report into pensions concluded working people will have to save more, work longer, pay more tax or accept a lower standard of living in retirement.
All the parties should say which of these options - none are vote-winners - they favour. Their failure to do so reflects a fundamental problem with politicians' approach to the question of pensions. Their horizons are limited by terms of office that last five years at a time at most. As Blair, Howard and Kennedy will no longer be seeking office when their failure to reform pensions comes home to roost, there is no incentive for them to take controversial decisions today.
It is also no coincidence that politicians are the one group of workers definitely not facing a pension crisis. MPs qualify for a fantastically generous final salary pension scheme, with benefits underwritten by the public purse, of course. On pensions, a more honest manifesto slogan would be "I'm all right, Jack".
Check it out
That Tesco's £2bn profits, announced this week, include £200m from its financial services arm shows the dramatic impact supermarkets now make on family finances.
Tesco sells trolleyloads of credit cards, loans and insurance because it is better value than many well-known lenders and insurers. Other firms are worth a look, too: Sainsbury's financial range is even cheaper in several cases. And Asda and Morrisons are also improving.
If you're buying financial services and don't need advice, a supermarket is now often likely to offer the best deal.
Even better, while the supermarkets are often criticised for exploiting suppliers, these products are sourced from established financial services companies. So you can get a good deal and screw big banks and insurers at the same time.
Why credit cards are the latest Turkey Twizzlers
Comparing the cost of credit would be much easier if lenders all quoted interest rates in the same way. So it is bizarre that the Government has this week decided to reject a recommendation from the Treasury Select Committee that lenders should have to adopt a standard formula for advertising interest rates.
The Department for Trade and Industry believes such rules might be counter-productive, reducing choice for consumers. Choice is a familiar mantra with this Government, which regularly uses the concept as a reason not to support campaigns by consumer bodies. It was the line trotted out, for example, when ministers refused to ban junk food in school dinners.
In this case, the Government has fallen for a spurious argument peddled by credit card lenders. These companies are engaged in a frantic price war - all too often, sneaky charges and complicated interest rates are their way of clawing a few pounds back from borrowers. As a result, it is difficult to make an informed choice about the cost of plastic. At a time when consumer credit is at epic proportions - borrowing topped £1 trillion for the first time last year - that makes no sense at all.
Sometimes, governments have to take action to protect people from themselves. Expensive credit cards and loans are the Turkey Twizzlers of the financial services industry. But until the health warnings on pricey plastic are made more prominent - with clearer information on what borrowing actually costs - people will keep piling on the pounds.
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