UK Pensions

A UK pension it is said is not enough to keep a couple in old age. It is about £7000 per year in 2007, much less than in France or Italy. Of course, it is said the British government has been prudent in the long term and continental pension funds will go bankrupt quite soon. It is not quite clear how socialists have allowed this to happen! But perhaps these days 'New Labour' and the Communists are turning into good capitalists because they have no choice.

It is a different argument on private (company) pension funds. Many of us get two or more pensions, one from the government and one from our employers. When Chancellor Brown removed surreptitiously £5 billion per year from private pension funds, it was done so cleverly that no one noticed for a decade. Now many private companies are shutting down their old pension funds which paid pensions on final salary and this implies less money for company pensioners years into the future.

One factor no one likes to talk about is that for many years the government allowed companies to take 'contribution holidays' as their pension assets were above 105% of their liabilities. It is said companies saved $19 billion over that period due to buoyant stock exchanges.

An intelligent observer might have assumed that this £19 billion would have been put aside for a rainy day. For it is clear that rainy days do occur over the forty year period which must be spent accumulating assets to pay pensions. But no! The UK government insisted that this £19 billion should be paid out to shareholders as profits (dividends). Again I am suprised that it is a Labour government which rewards the shareholders in preference to the future pensioners.

Of course, a future British government could reverse the decision on the £5 billion per year tax on pension funds, but don't count on it. The fact has become evident over recent years that there is a disconnect between governments and their ability to plan for 40 years ahead. I imagine for the average politician it is hardly worth the trouble with sea levels rising and carbon Dioxide levels out of control. We have to fight our own battles over 40 years, but as in the past it will be the 'rich that gets the pleasure, and the poor that gets the blame'.

The problem for government is how to hold the ring between those of us who do not save for the future, either because we are too poor or too careless over that 40 years and the prudent who believe that they have to look after themselves- but don't wish to see their savings taxed away by profligate governments.