Julian Knight: Pension compromise simply postpones the inevitable pain
Sunday 05 February 2012
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.
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.
- 1 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 2 Swedes set up 'ultimate Viking movie'
- 3 After woman sells virginity for $780,000, here are the results of our prostitution survey
BMF is the UK’s biggest and best loved outdoor fitness classes
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£850 - £1000 per day: Orgtel: Programme Change Manager - Banking - London - £8...
£180 - £230 per day: Orgtel: Operations Analyst - Leading Bank in the City of ...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
Day In a Page
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000
A one-bedroom flat with an open-plan reception/kitchen and private balcony. £315,000.
A bright two-bedroom garden flat between South Acton and Chiswick Park. £499,950.
A listed four-bedroom farmhouse with stables, set in four acres. £500,000.
A three-storey family home with four bedrooms and an extended kitchen/diner. £995,000.
A three-bedroom Hamstone cottage in the rolling Somerset countryside. £430,000.
A luxury one-bedroom apartment on the first floor of a converted Victorian house. £425,000.