Crisis What Crisis? Future Shocks - Part 1

So there is a pensions crisis over here, there probably is where you are too that is if you are in a country that still has such socially-progressive things and has not some Dickensian workhouse ethic.

It has been reported for some time that things could not continue the way they have been and the options given were simply a) either raise the retirement age, or b) save more money over a longer period of time. Both companies and people are being blamed for not saving enough money, and additionally at fault is the fact that we are supposedly living comparitively longer (as if this is somehow a bad thing) and therefore are more of a drain on the financial resources. Companies are being told to contribute more or the government will be forced to bring in legislation and individuals are being told that they must start saving much more of their income much sooner. It is interesting that the legislative process will clearly be brought into place over the individual before it will be considered for the companies.

OK when it comes to money I have always been kind of short-termist, but then I have never really had the sort of money that would allow me to be otherwise. At the moment I earn what would be classified as a reasonable sum of money for the first time in my life, I am in a job that would be classified as graduate and white collar, it isn't in a higher tax bracket or anything close but most people would think you'd be alright with that as your salary. Now whilst my situation is a little out of the ordinary in so far as I have both children and ostensibly 2 houses to support accordingly not to mention large debts as a result of tertiary education, it is not so unheard of that I am somehow a special case, in fact as time goes on and the cost of University education increses my position will be seen evermore as moderate. And yet paying 6% of my monthly salary into a pension is almost more money than I can afford to be without. So what about those who have similar outgoings to me and only fractionally less money, it must tip them over the edge. And those who have similar outgoings but substantially less income how the hell are they going to manage to be without more of their money?

As for business, well to my mind not agreeing with private industry myself I can to an extent hold my hands up and say well that is always going to be what happens, companies will siphon off what they can to keep the board of directors and investors happy before employees get anything However clearly in the short-term one must look at provision for those who are going to be retiring from such positions within such companies. Of course there are some who's pensions are more than ample. Take the former bosses of the MG Rover group who managed to award themselves pension plans in the multi-millions shortly before the company went bust due to lack of funds. John Towers, the Phoenix chairman, deputy chairman Nick Stephenson, Kevin Howe, its chief executive and directors John Edwards and Peter Beale received salaries totalling £9.7m since they bought Rover. They also set up a pension fund for themselves and their families estimated at between £16.5 and £40 million whilst they controlled the company. It hardly takes an economist to work out why the company didn't have any funds when you look at the salaries of the directors and their pension plans. The workers at MG Rover are in a slightly different state - instead of being offered a share of the assets of £50 million (the pension plan ended £470 million in deficit) they have been offered an ex gratia settlement by the former directors of £5000, however this is not £5000 each which would be precious little enough it is £5000 between them, working out to 82p each. To be honest such a derisory sum is an absolute insult and taken in comparison with the relief package by the taxpayers which is expected to be around £50m one cannot help but think there is something very rotten in the system that this should be allowed to happen.

As I have mentioned in my last post the top 400 company directors in the UK paid themselves £1 billion in pensions last year alone, which illustrates that the Rover example is by no means the exception but the rule. It seems staggering that as the gap between the richest and the poorest continues to grow in the "developed" world the issue of the redressing of the balance by taxation means is not tackled. The same solution exists for the pensions crisis if only the political will did. Ultimately the problem can be broken up as follows: You have a population most of whom will require some form of state pension once they get to retirement age. If as a hypothetical figure we say that of the 75 million in the country 10 million are past the retirement age. If we take as a fair sum to live off in the modern world as £20,000 this would mean one would need £200 thousand million to pay for it. It's a lot of money and yet this is not money that would have to be found instantly if it were planned for properly. A contribution system which most countries in the West employ would be able to cope with this sort of requirement with some ease. Furthermore it is not as if this sort of money isn't pissed down the drain into wars and newer nuclear deterrents and yes, religious institutions if you press me. There's no question the money IS available because if you were to take a simple figure of a working population of 40 million earning an average wage of £10,000 and taxed at 30% this brings in well over £1 billion and therefore more than 5 times the amount needed for pension provision which naturally is just as well for the provision of healthcare and welfare benefits. It is true this is very basic economics using simplified figures for my own understanding rather than any desire to patronise my readership who, I am sure have a greater comprehension of economics than I.

Working longer should not be necessary, even this is an area which fundamentally favours the well-off. Firstly the rich are more likely to have been to university and thus not starting work until their early 20s whilst their life expenctancy is approximately 18 years after the age of retirement whilst in stark contrast the less well-off are more likely to have left school at 16 or 18 and their life expectancy is only approximately 13 years of age after the age of retirement. This means a disparity of anything up to 11 years between the classes. Are we saying in the 21st century that if you are more or not of academic bent that you must work for 50 years until you can rest?

This is not to say that there should not be provision for those that would like to work beyond the age of retirement, it has always struck me as a little ludicrous that I know of many forced to retire against their will whilst the government and financial institutions bash on about us having to work longer in the future. But, sadly in this society we do not see the old as the wizened, experienced mages, holders of our history and what we are indeed to become, instead they are a drain on resources such as the NHS and council housing and national insurance.

It is time now to face up to stark choices. Those in power currently represent the old order, funding fossil fuels, wars to prop up the dominance of the capitalist economic cycle, big businesses and the industrial era. This era will soon be the past the question is will we be ready for it or plunged into chaos due to the inactivity in this area from governments. Whether it be our pensions or energy policy the Western governments have made an error of catacylismic proportions not making any funding or research to safeguard the future. What they seem incapable of grasping is that this is not simply a problem that can be circumvented, the future is going to happen, the question is will we have any idea how to cope with it?