AS Charles Dickens said: “It was the best of times, it was the worst of times….” His memorable opening to A Tale of Two Cities reminds me of our pensions industry.
If you work in the private sector, it is the worst of times, unless you are a fat cat who has looked after himself very nicely. In the public sector, it is the best of times – or, as the Government says “It’s as good as it gets”.
A tale of two cities, indeed.
In fact, we are becoming a nation divided, not between the haves and have-nots but between the haves, the have less, though how much less is anybody’s guess, and the have nots – the appalling 40 per cent of our population who are not saving a thing for retirement, with all the dire implications that has for the future.
Leave aside the improvident, much of this has happened in the last 15 years. Up to then, we prided ourselves on having the finest pensions provision in the Western world.
Who would have thought we would end up in this mess?
It is further testimony to the danger of putting Labour in charge of your money. It makes Ed Miliband’s job as Labour leader virtually impossible.
So what is the coalition going to do about it? In his search for a “fairer” Britain, David Cameron does not yet see restoration of private sector pensions as a priority. This is understandable, given the level of public debt he inherited. His first concern is to get public sector pensions under control.
Lord Hutton, the former Labour Minister who reviewed the system for the coalition, would require public employees to pay more and work longer for pensions based on average lifetime pay rather than final salary. He now thinks this may be overly generous but that is what is on offer.
Local government staff, teachers and some NHS workers are turning up their noses at it. They want blood. But they cannot – and will not – get it. Their attitude is as arrogantly patrician as it is impossible to fund. They will have to get used to a little less in their declining years.
Although I have a final salary pension, I find it difficult to justify. I fear they have helped to cause top salaries in the public sector to run out of control over the past decade.
The result – with many in local government as well as 172 civil servants earning more than the Prime Minister (£142,000) – is ample testimony to the replacement in high places of the public service ethic by rank exploitation.
We have long seen the same opportunism in the private sector where top salaries far exceed ability and are a denial of leadership. The idea that these stratospheric salaries (and pensions) have to be paid to keep the “talent” in this country shows these mercenaries have as much commitment to this nation as the average soccer player to his club.
But contempt for the top brass does not solve the problem of the poor bloody infantry who march under them. Sooner or later, Cameron, as a PM with a longer view, is going to have to face up to the problem.
He cannot responsibly allow the majority of the population who create the wealth to pay for his – and all – public sector pensions to fall into penury in their old age simply because their private sector bosses, for whatever reason, dump their social obligations. The consequences are likely to be horrendous.
But he will have to tread carefully. The current mess is not primarily the result of the financial crisis or the travails of the stock market. It stems partly from well intended regulation pre-occupied with beneficiaries’ “rights” prompted by Robert Maxwell’s milking of the Mirror pension fund.
But the killer blow was probably Gordon Brown’s £5bn-a-year raid removing the tax credit on dividends so that he could bribe public servants to vote Labour. We are told that but for this many pension funds would still be showing a surplus.
Which takes me back to Cameron’s task. He has to bring the same security to private sector pensioners that public servants enjoy. In going back to the drawing board, he may not be able to do much about the rise and fall of the stock exchange, but he can end the robbery, jobbery and confusing mumbo jumbo that come with pensions these days.
We need to get back to the best of times when a private sector pension was what it originally said on the tin.