The business and economics sections of the press have been dominated by the problems of private pensions in recent months. Once a dull-as-ditchwater subject about which journalists and the public showed little interest, the state of our retirement nest eggs is now a major policy issue. Hundreds of blue-chip British firms have shut pension plans to new staff, such as those which offer to pay a benefit linked to final salary at retirement age. Some workers even suffered the torment of losing all their accumulated pension when their sponsoring firms went to the wall. All in all, it has been an alarming time for those dreaming of retirement.
But to read the media, you would hardly know that the biggest pension scandal of all is in the state system. James Bartholomew, writing in the Sunday Telegraph, pens a scorching denunciation of state pensions. He points out that we are told by the experts that retirement ages will have to rise, and, to be fair, improved life expectancy (surely a triumph of health and living standards rather than a problem) makes that a sensible option. But taxpayers who paid their national “insurance” contributions are being told that the state is welshing on its side of the bargain. If a private business operated on the same basis as the government did with tax-funded pensions, the directors would be sent to jail for mis-selling on an epic scale.
Reform of our creaking state pensions system remains one of the most intractable public policy issues of the age. The destination — a system of privately held accounts may be obvious to a free market zealot like me, but getting there is going to be very, very hard unless politicians have the sense, and the courage, to scrap all taxes on savings income and capital gains to make widespread long term private saving a reality.
The present state of affairs cannot endure.