Julian Knight: Pension compromise simply postpones the inevitable pain


The Institute of Fiscal Studies was busy last week. First, the IFS calculated that the Government's public-sector pension reforms will not save the Exchequer any money.

The problem is that so much ground has been given to the unions, and more pertinently the Lib Dem part of the coalition, that there will be no cost saving. It's depressing that we have been through strikes and a year or so of mud-slinging to reach such a situation.

It means, of course, like the Labour government's agreement with the unions, that we will have to go through it all again in the near future because the sums do not add up. It's as I feared when the details came out about the compromise being proposed by the Government. It's gone too far. The argument for me isn't about who has the better pension, public or private, it's that the private sector is taking on the investment risk for those in the public sector. And, according to the IFS, that will still be the case despite the reforms.

The IFS's other area of activity last week was its recommendation for the upcoming Budget.

It put the case for a tax cut to ease the economic situation. Now with the UK's budget deficit worse than Greece's you'd think that this was a mad time to cut taxes, we need every penny we can get.

However, the crisis in the eurozone is dragging our economy down, and although it would be a massive error for the Government to go back on its public-sector spending cuts – this is necessary to rebalance the economy back to more productive private enterprise as well as keeping the international markets on side – putting some money in people's pockets right now could be just the tonic needed to see the economy out of this dip. A few billion given back in the Budget could mean much more gathered through the tax-take from greater economic activity.

It would help consumers who are being squeezed by higher prices and poor wage settlements and lift the mood a little. Confidence is key to avoiding a dip turning into a full-blown recession. There is a small amount of wiggle room: the markets will understand as long as the programme of public-sector spending cuts is restated and the IFS is right to suggest the Chancellor takes this opportunity.

Future penury

So much for enjoying your golden years. Pension provider Friends Life has produced a report on the future home of the pensioner. And instead of relaxing in an armchair to a bit of Countdown and a sweet sherry in the afternoon, we face having to manage a host of cottage industries to fend off abject poverty.

Pensioner homes will be part-time work places with silver surfers flogging their prized possessions on eBay, tutoring or even managing a crèche. Our later life could be more manic than our working one, according to Friends Life, unless we save sufficient amounts in, guess what? A pension.

One way though that pension providers could save us from old age penury and toddler lassooing is by lowering their charges. Last week, a study showed that someone paying £200 a month into a pension over 25 years could expect to pay £20,000 extra in charges between the highest and lowest charging pension plans.

True and Fair

On the subject of charges, the True and Fair campaign was launched by husband and wife team Alan and Gina Miller last week. Both are names in the City and, with the backing of consumer groups and a smattering of MPs, the dynamic duo would like to see a clearer explanation of fund charges given to investors.

At present we have a plethora of small charges loaded on investment funds with no easy way to tell which funds are cheap and which expensive. In fact, all too often the huge number of poor performing funds are able to get away with charging the same as the best performers.

Now putting aside the subject of what passes for pillow talk in the Miller household, we are long overdue real transparency in this sector and I hope there will be some real momentum behind them. Last week a couple of managers cut charges on some products. But the fear is that those paying lip service to more transparency will return to the old ways as soon as the fuss dies down. It is, after all, easy money.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'