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Whenever I read a story in a newspaper’s personal finance section, I tend to grade its importance on the basis of its origins.

At the bottom of the pile is the “survey”. I alluded to them last summer – the ones which purport to show that 98 per cent of all 45-year-old married women think their husbands are fat lazy slobs and would happily run away with the milkman – as long as he has critical-illness cover with company XYZ.

Then there are the more portentous pieces of research, in which respected outside research units are hired by providers to create “reports” that – tangentially – back up the need for whatever product that firm is selling.

Last, there is material that has been dug up and investigated by the reporter. They aim to tell people something that they might never have been informed about or not at that time. I take those stories very seriously. Happily for me, there were examples of two of these which grabbed the headlines last week. The first was Nicholas Timmins’ story in the FT about some of the proposals likely to be in the Turner report, due to be published on November 30.

Apparently, the report will recommend raising the state pension age to 67. A higher basic state pension would mean many of the means-tested top-ups such as the second state pension being scrapped or modified to achieve a much more seamless transition to a higher overall retirement income for all pensionersIn addition, a pensions savings account called Britsaver may be launched, into which all staff and employees may be asked to contribute although they will be allowed to opt out. These leaks suggest that a serious reshaping of the pension system is being proposed and not entirely in a way that New Labour might have wanted.

We also had an example of the other story I alluded to, the one with research of great augury. Prudential published a report commissioned from Datamonitor suggesting that, from next year, state pension benefits are set to be overtaken by the private sector, including occupational pensions, as a proportion of the average pensioner’s income.

Last year, according to Pru/Datamonitor, pension benefits paid by the state accounted for 51p in every pound received by pensioners. Next year, the proportion will be exactly reversed and, by 2014, just nine years away, Pru/Datamonitor predicts that the proportion of state-provided income will drop to just 44 per cent.

One problem with research like this is that whenever I read it, I always find myself thinking: “How the f*** do they know that?” Another is what to make of it. One way might be to infer that if the proportion of our pension income that is provided by the state falls, this proves that we are all saving more.

Pru reckons that a greater proportion than ever before of “top-up” income – the amount over and above state benefits – will come from personal pensions and similar investments such Peps and Isas. All these are provided by the company and others like it.

Another growing contrib-ution to the income pot will come from residential property. No surprises, then, that in the same release as the Pru Pensioner Pound report, we “discovered” that Pru offers a form of equity-release product as its own contribution towards solving retirees’ financial problems.

The real issue, for me, lies with the assumption that investments or property are likely to offset the paucity of the state pension when people retire.

Let’s look at shares first. Everyone remembers the 50 per cent collapse in share prices between 2000 and 2003. How can we trust the market to deliver a decent – and safe – retirement to everyone and could everyone afford to save as much as they should towards their pensions?

Moreover, anyone who has lived through the last 20 years will have experienced the housing market collapse of the late 1980s, when prices dropped by 25 per cent or more so the notion that we should entrust our future retirement income to a geographical property-price lottery strikes me as bizarre.

Apart from anything else, it also ignores the rather important minority of people who, for whatever reason, are unlikely to be owner-occupiers. For example, council tenants, who make up 35 per cent of all households in Scotland and 26 per cent in England. At the end of the day, you cannot sell and live off the proceeds of what you never owned in the first place.

This is why, if the Pru’s assumptions correct, we would see a massive widening of the gap between the better-off and those forced to depend on the state for their retirement income.

Those who own a property or who have saved a little would be caught between a rock and a hard place, dependent on meagre savings and forced to sell up to get some extra income, with the amount they get depending, literally, on where they live and demand for their particular property.

It sounds barmy to me and if the leaks last week are correct, it would seem that the Turner Commission agrees, thankfully. This confirms the old journalistic thumb-rule yet again – the more disinterested and significant a “report” seems, the more it invades the arena of public policy rather than just being another shaggy milkman story, the more it becomes just another load of b******s.


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