Nic Cicutti: Why aren't pensions a priority?
One of the things I have learned in the past two decades as a personal finance writer is that very few people really care about the one thing that ought to matter most - pensions.
If you ask someone if they are worried about their potential lack of retirement income, they will agree with you and the white-hot anger when the Government announced that pensioners would receive a pension increase of just 75p a week was something to behold.
But by and large, the majority of punters get more angry about their washing machine breaking down just outside the warranty period than they do about the possibility of living in penury for several decades after they finally stop work.
Indeed, just to return for a second to the 75p a week “mistake” by the last Labour Government, at least that is what Gordon Brown admitted it was several years afterwards, the angriest people by far were the pensioners themselves.
Deep down, the rest of us felt a sort of resigned disgust, a sense that this was, after all, no more than we might expect of a Government with a track record for saying one thing and doing another.
Whenever I hear people talk about pensions, I generally get a sense of fatalism, as if nothing they do will ever generate the kind of money they might need in retirement - and if they ever do bother to save, someone will come along and take that money off them anyhow.
In recent months, two things have further confirmed that view and that feeling of passivity. First was the announcement by the Government last year that pensions and benefit payments will be uprated in line with the consumer price index rather than the retail price index.
This means much smaller pensions for millions of workers when they retire. Saga director general Ros Altmann said: “The Office for Budget Responsibility forecasts that RPI will be around 1.5 per cent higher than CPI each year. It is a big cost saving for the Government.”
Yet the response to this sleight of hand by George Osborne was muted. A few hundred words in most newspapers about the trade unions’ failed legal challenge in the High Court last week and that’s it.
Then there was the announcement in the autumn statement last week that the Government is to delay auto-enrolment.
This was portrayed as an attempt to avoid imposing punishing extra costs on small businesses - effectively, an admission by the Government that it knows we are still likely to be in the economic mire three years from now.
But as the Telegraph’s Ian Cowie pointed out, the delay will affect millions of young people, for whom the effect of compounding means a 12-month deferral will lead to a much reduced pension in retirement. He gives the example of a 22-year-old earning £25,000 a year, where the one-year delay will cut his fund value at 67 by £43,000. Even a 50-year-old will see the value of his fund cut by 10 per cent.
Finally, there is the response to the Government’s decision to massively cut pensions for state and local government employees. The argument here seems to be this is a vitally necessary move. Why should public sector workers get decent pensions when those in the private sector don’t and why should taxpayers have to fund these unaffordable gold-plated pensions anyway?
In other words, having decimated the pension entitlements of private employees and given themselves vast pay increases over the past decade, our Government and employers tell us it is now essential for the public sector to join the race to the bottom. Never mind that several public sector pension schemes have built-in agreements that any extra costs in coming years will be met by increased employee contributions.
I should declare an interest. I worked for many years as a nurse and still know many health and public sector workers. This Government is, in effect, telling this group of people, many of whom perform vital services for the community, that they will have to work several years longer, pay £60 more a month - for a typical band five nurse taking home £1,400 a month - and receive a far smaller pension when they retire.
And, like performing seals, the near universal view among commentators is to applaud the Government. Never mind that MPs who make these decisions have some of the most generous pensions in the UK or that if people find that their occupational scheme entitlements are removed they will simply stop paying and leave taxpayers to pick up the tab 15 or 20 years down the line.
The issue of pensions has never been one of simple affordability but of priorities. Sadly, it is not a priority for anyone - the state, or the rest of us. Some time soon, I fear a dreadful reckoning.
Nic Cicutti can be contacted at email@example.com