Politicians continually avoid crucial opportunities to reduce the public’s suspicion and apathy
What is it that contributes to an all-pervasive sense of mistrust about the pensions system in this country? That makes people less, rather than more, likely to save for their retirement? Why do so many of us have such a fatalistic attitude to how we will manage financially when we stop working?
I have been pondering these questions over the past few weeks and – contrary to what many readers of this column might expect me to say – I do not believe the financial services industry is solely to blame for the sense of disillusionment in this country.
Sure, we all know about extensive personal pension misselling in the past. It is also true that people are instinctively mistrusting about being ‘sold’ financial products they do not understand, which have a nasty habit of delivering far less than they promised at the outset.
But all the evidence points to intertwined scepticism about the entire pensions edifice, whether part of the private or public sector. It is not that the pension providers are bad and the state is good, or vice versa; more a sense that they are all as bad as each other.
I have recently been emailed by a woman who is part of the Women Against State Pension Inequality age cohort – those born on or after 6 April 1951 and who have been faced with sharp and unforeseen hikes in their retirement ages.
The woman in question had read a column I wrote in Money Marketing last year and wondered if there were any developments to the story.
The unfortunate truth is that, no, there is not. Saccharine sympathy from some Tories ahead of the June 2017 election has now been transformed into a refusal to arrive at any compromise that would address the plight of the Waspis.
Meanwhile, Labour, Liberal Democrat and Scottish National Party sympathy for the Waspi cause has also come to nothing, with proposals from the Official Opposition amounting to a row of beans. To give women the right to stop work two years early but on an actuarially reduced state pension is bonkers: which bit of “can’t afford to retire” does Labour not understand?
Millions of women are affected by the decision to accelerate their retirement ages in 2011. They have families – husbands, sons and daughters – who are familiar with their plight and want to see this issue resolved.
Yet now the election is out of the way for a few more years, all they have been shown is two fingers by the government and a few embarrassed coughs from the Opposition.
Then there was the excellent recent article by Guardian financial journalist Rupert Jones about a World War Two RAF pilot and war hero, who retired to Australia in 1987.
Harry Penny OBE died two years ago, aged 94. At the time of his death, his state pension was frozen at just £38.80, the same level at which it was first paid when he retired.
His widow Gay, who is 95, also receives a basic state pension frozen at £38.80 a week.
Harry was one of more than 500,000 Brits living overseas caught in a bizarre pension trap whereby their pensions will never be uprated in line with inflation, as they would in the UK, no matter how much tax they paid or National Insurance contributions they made during their working lives.
There are more than 100 countries where the value of a Brit retiree’s pension remains frozen in perpetuity. Among the oddities like Afghanistan, Albania or Burundi, the key countries the vast majority of UK pensioners are likely to live, and where pensions are frozen, are Canada, New Zealand, Australia, Pakistan and a number of other Commonwealth countries.
In an earlier story on this same issue, Jones drew attention to a Falklands War veteran, who met and married a Falklands islander, moved to live permanently in that territory with his wife in 1986 before retiring there six years ago. Now aged 71, his weekly pension of £106 is already £20 less than someone living in the UK.
Had he moved to the US, Turkey, even the Philippines, his pension would continue to be uprated with inflation. Had he retired to Bermuda, not only would his pension be protected but he would be entitled to a winter fuel allowance.
The estimated cost of addressing this issue, increasing every retired person’s state pension to the levels currently paid in the UK, is £500m a year, though in one parliamentary debate I have read, a partial uprating – increasing the pensions currently paid in line with inflation from now on – would only cost £37m year.
I can think of plenty of ways the government could save or raise money that would help both the Waspis and the overseas pensioners. It will, of course, refuse to listen and, even assuming Corbyn and his mates get to office, they too will do little or nothing.
The end result, for many people, is a sense of suspicion that ultimately drives the apathy they feel about saving for their retirement. Politicians sow the seeds and the rest of us reap the rewards, in more ways than one.
Nic Cicutti can be contacted at email@example.com