Category Archives: Pensions

Osborne’s budget giveaway for pensioners: never have so many lambs been so ripe for fleecing

We are now being presented with yet another almost unbelievable example of how ruthless the Tories are prepared to be in their own interest at the expense of the gullible and vulnerable.   Already last year Osborne ruled that 320,000 savers a year with ‘defined contribution’ pensions would no longer have to buy an annuity – they could take the cash in their pension pot and run with it wherever they liked, whether buying a car, taking a world cruise, tapping into the buy-to-let market, or whatever feelgood bonanza took their fancy, and whatever the long-term consequences of running out of money.   All for Osborne to cash in on the pensioners’ vote.   Now he’s proposing to go much further in next Wednesday’s budget giveaway day.   He’s now intending that any of the existing 6 million pensioners who missed out on last year’s offer because they were already locked into annuity contracts should now have the opportunity to escape these agreements.   The rush for the exit has already started, even though taking out and spending capital reserved for lifetime income could well disqualify such a person from free social care later.
Read more   “Osborne’s budget giveaway for pensioners: never have so many lambs been so ripe for fleecing” »

If you think bankers are greedy and self-interested, you should meet fund managers

The latest incomes data shows bankers still getting obscenely high remuneration and whopping big bonuses, yet they are being overtaken by another group within the finance sector.   Fund managers have now overtaken the pay and bonuses of bankers, though they’re keeping it very quiet.   They say there’s no need for customers (i.e. the investing public) top know about their pay because all the overall data about running a fund – its cost, performance, etc. – is already published.   But this evades the role which fund managers should be playing, but are not playing, under free-markets anything-goes contemporary capitalism. 
Read more   “If you think bankers are greedy and self-interested, you should meet fund managers” »

Private pension markets are riddled with internal contradictions and are not working

Thatcher ended the best pension scheme the UK has ever had, and pensions have never recovered from the consequent decline as constant mis-selling scandals continue abundantly to demonstrate.   Barbara Castle’s SERPS schme in the 1970s was generous particularly to the low-paid and to women, highly popular, and provided universal protection against poverty in retirement.   Thatcher reduced its generosity by cutting the accrual rate, gave individuals an incentive to opt out of SERPS into personal pensions which turned out to be much poorer quality, broke the link between earnings and the basic State pension, and allowed individuals to opt out of occupational schemes which had previously been a key element of the social wage.   These opt-outs led to a great mis-selling scandal as commission-hunting salesman persuaded many to shift to poor defined contribution (money purchase) schemes.   The State retreated from guaranteeing earnings-related retirement income to merely providing a low means-tested safety net, and as the State basic pension steadily declined relative to earnings it inevitably led to a large rise in pensioners subject to means-tested benefits.
Read more   “Private pension markets are riddled with internal contradictions and are not working” »

Tories’ latest bid for elderly vote: collective defined-contribution pension schemes – wow!

Pension schemes can be guaranteed to cause a deep yawn, if not escape into outright sleep.   So the government has decided to pep up its grey vote with some exciting new pension proposals.   Do collective defined-contribution pension schemes get you tingling?   Me neither.   But it’s important to understand them because they will affect the lives of millions of elderly people and are riddled with drawbacks and contradictions.    They are (presumably) the final element in the government’s pension package which has included several other significant changes.   They have abolished the earnings-related element of the State pension, thus depriving millions of contributors of the higher pension that they earned.   They have ‘triple-locked’ payments so that they increase by inflation, average earnings or 2.5%, which is higher – a commitment which increases the cost to the State and will likely be abandoned in the event a future budget crisis.   They have ended employee opt-in to private workplace pension schemes by automatic enrolment.   And they have removed the requirement that people with defined-contribution schemes must buy annuities, so that in future they will be able to blow the money accumulated in their pension pot on a car, a world tour or whatever, leaving them selves bereft thereafter.
Read more   “Tories’ latest bid for elderly vote: collective defined-contribution pension schemes – wow!” »

Cutting winter fuel payments for those on the higher rate is another Labour own goal

Ed Balls didn’t have to say it.   It will save a piffling amount of money relative to the size of the budget deficit which is still plateaued at £122bn.   Inasmuch as it’s a Tory-style policy, it’s doing the Tories’ dirty work for them.   And it’s another nail (admittedly not the first or the only one) in the coffin of universalism.   So why did Balls do it?   The Blairites at the PLP commended it on the grounds that it showed that Labour was quite capable of taking ‘tough’ decisions!   As though trying to out-tory the Tories will bring the voters flocking in, or as though pre-empting what the Tories were probably going to do anyway (since it’s already been talked about extensively in Tory circles) is really smart politics.   The honest truth is it just confirms that the toxic New Labour brand is still there in the Labour Party and that the view already widely held, that there’s really not much difference between the two parties, is right.
Read more   “Cutting winter fuel payments for those on the higher rate is another Labour own goal” »

Simplicity for pensions is not the issue: it’s the value that matters

IDS’ side-kick, Steve Webb, unveiled the £144 a week single-rate pension yesterday, triumphantly noting its simplicity.   So which would you have – a simple pension or a decent pension?   And £144 a week, less than £7,500 a year, is not a decent pension.   It’s a shameful fob-off after a lifetime of working which is now being extended to the age of 66 from 2020 and to 67 from 2028.    Britain already has one of the poorest State pensions in Europe, and the government’s latest proposal will actually lower the proportion of GDP spent on pension-age benefits from 8.5% in 2060 under the current system to just 8.1%.   The £144 a week is far, far lower than the pension that would have been paid now if Barbara Castle’s SERPS 1970s scheme had been allowed to mature and not emasculated by the Tories in the 1980s, and lower even than the basic State pension would have been if Thatcher had not broken the link with average pay in 1980.
Read more   “Simplicity for pensions is not the issue: it’s the value that matters” »

Miliband spot-on to target pension industry fees

The private pensions industry is a colossal financial scandal second only to the banks.   It is a staggering fact that charges swallow up 40% of the value of a pension over its lifetime which must make this one of the worst deals ever in the market-place, even by the standards of the inefficient and greedy private market.   And even when pension returns are falling sharply, the management greed continues to soar: between 2002-7 the charges levied by pension funds globally rose over 50% whilst the returns going from pension funds to pensioners over rthe same period actually fell three-quarters from 4.1% to 1.1%.   Very few people, unfortunately, understand that an extra 2% annual charge (which is quite standard) can over the lifetime of a pension halve its value to savers.   Ed Miliband is right therefore to commit to making these hidden charges transparent: Labour will require that charges each year (both in percentage and cash terms) as well as the projection of the sum lost to charges by the time of retirement must be provided to every saver.
Read more   “Miliband spot-on to target pension industry fees” »

Privatisating benefits the public? – pull the other one

So the latest Tory wheeze to commercialise the NHS is to get hospitals to sell their services abroad, using the NHS brand to rake in more private money (which would not of course be necessary if the government were not imposing £20bn cuts over 5 years).   It is claimed that NHS patients will benefit.   But the (very considerable) funding required to set up expensive state-of-the-art clinics and hospitals in the Middle East, India or China will have to come from already severely depleted NHS budgets, reducing services still further for NHS patients in the UK.   And what guarantee is there that any proceeds from these foreign investments will all be used to benefit NHS patients rather than extending private facilities in NHS hospitals?
Read more   “Privatisating benefits the public? – pull the other one” »

Levelling down for public pensions, not for the rich

The agreement finally reached on the local government pension scheme after the government made significant concessions has rather less to do with official generosity than fear about the consequences if the scheme were so eviscerated that hundreds of thousands of local government workers might decide there was no point in continuing to contribute to it since, if they walked away, they would still get the same amount of money in retirement from means-tested income support.   That single fact gives the lie to the endless government mantra that public sector pensions are so extravagant that they are no longer affordable.   The truth is that the average public sector pension for women working in local government (and most such workers are women) is just £54 a week.   Would any of the critics of public pensions want to live on that each week?
Read more   “Levelling down for public pensions, not for the rich” »