Culture of Despair doing nicely ...

Old ...

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The UK Culture of Despair took a major step forward yesterday. The TV and newspapers were full of the story that millions of people had inadequate pension provisions and would spend the last 20-30 years of their lives living in abject poverty. Yet, somehow, without the slightest trace of irony we also heard stories on the same day about how the NHS was going to spend £30bn on a new appointment booking software, London Underground was going to drop £600m on a system that would enable it to run 350 trains per hour along every platform (wow!), or that over half of our soldiers believe that the millions, maybe billions, are wasted on overpriced, ineffective equipment.
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The pension story is depressing not least because of the lies and disinformation that accompany it.
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Not everyone has a problem. People who work in the public sector have final salary pension schemes guaranteed by the same private sector taxpayers who are looking forward to spending their autumn years visiting soup kitchens. No money has ever been put aside to fund public sector pensions, they're just paid for out of each year's taxation. Now that's what I call financial prudence. Some Fire Brigades now spend as much as a third of their annual total spend on pensions; leaving two thirds of their money to put out fires.
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Once again the Government trotted out the story that we're all living longer. We are, but not by as much as we're led to believe. Most of the increase in life span is due to statistical tricks based on reductions in infant mortality. The life expectancy of a 40 year man has barely improved over the last 50 years.
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The conclusions are that we should save more or pay more tax.
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But we are paying more tax - it has risen remorselessly in order to fund fireman's pensions, pay management consultants for unnecessary, multi-billion pound software systems, invade Iraq with defective military equipment, support 250-400,000 arrivals into the UK every year, fund the huge increase in incapacity benefit (a couple of million people have apparently been disabled over the last 4-5 years) etc etc.
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Mmmmm, save more? We could do that but we are taxed on savings interest to a point where the return doesn't cover inflation. Alternatively, we could put money into the stockmarket, which is already overvalued, and wait to lose 40% next time there's a crash. That's all academic anyway because our economy is currently only sustained by a huge explosion in customer credit. If we stopped borrowing and spending and saved instead, the whole economy would deflate and taxation would really rise seriously.
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Once you've retired you are currently obliged by the Government to use your savings buy an annuity that pays something like 6%, compared to 4.5% in a savings account. The other difference between the two is that all the money put into the annuity gets taken by the insurance company as soon as you pop your clogs, however soon that may be. Yes, the entire annuity industry is based on two principles. Firstly, that you are compelled to buy an annuity on retirement. Secondly, that you will have spent 30 years saving to buy that annuity then die a couple of years into its term. This is a very nice, and profitable, business to be into indeed. Peope in the annuity trade are not worried about how they're going to fund their own pensions.
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Another amusing quirk of the pensions system is that if you retire with savings that bring you up to £30pw (say £50,000) you may as well blow the lot, as the Government undertakes to top up basic state pension by that much if you have no other sources of income. Yup, there's no difference on retirement between someone who has saved nothing and someone who has saved £50,000. That's the time to buy that second hand Ferrari you've always promised yourself. This situation will be particularly annoying to someone who has saved, say, £50,001.
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The funniest aspect to the whole issue of pensions is that you don't really understand what's going on; annuities, minimum income guarantees, the colossal impact of pension fund management fees, until you've actually retired and then that's about 30 years too late. How you laugh. Some people have realised that a big screw was taking place and borrowed money to buy a second house rather than investing in private pension schemes. Not as smart a move as it might seem as a) lots of people doing that have pushed the purchase price of properties past a point that made economic sense and, most importantly, b) the Government knows what you're up to, will wait for the real turkeys to lose money and sell up, then move in and tax the bejesus out of those who did it sensibly.

That's the biggest issue of the whole pensions 'crisis'. In the UK, any moderate accumulation of capital gets hammered by the Government sooner of later. If you're really rich you have the means to avoid the worst aspects of taxation, otherwise forget it, you're toast. For us mere mortals the attractions of borrowing far outweigh the virtues of saving. An environment like that does not occur by accident.
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So, the UK is the fourth richest economy in the World with private sector employees working the longest hours in Europe, yet the State pays out just about the lowest retirment pension in the Developed World and apparently can't afford that. All the technology and productivity gains of the last 50 years have somehow evaporated and all that talk of the future 'Leisure Economy' was nonsense. There's some classic Orwellian Double-Think going on here. On one hand, we are being told we live in a well-run, vibrant and modern economy, at full employment, that needs to embrace 250,000 migrants a year. On the other hand, we are being told that we cannot afford to pay pensioners seventy eight quid a week basic state pension. I smell doo-doo and lots of it.
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Yes, we are being told that, unless we work for the Government or local council, we will have to work till 70, pay a lot more tax, or save an additional 15% of our incomes. The one thing we are not being encouraged to consider is what the vast wealth of this country and our already rather large tax bills are currently being wasted on.
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Time to think out of the box. There are alternative solutions. For example, everyone between the age of 25 and 55 could be compelled to take up smoking 20 cigarettes and eating two McDonalds Big Tasty Burgers per day (1,608 calories, 3 ounces of fat). Alternatively, those of us who can, could up-stakes and bugger off to another country that doesn't take the piss out of its citizens so much. Ooops, people are doing that already. Spain, New Zealand and Australia are currently undergoing a little bit of a UK migration boom at the moment.
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All together now ...
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'Things can only get worse! Thiiiiiiiiiiings ... can only get wooo-ooorse!'