Now I know how they’ll abolish the state pension

(I’ll deal with the myth of our economic growth tomorrow)

I’ve written before about why I think the state pension will eventually be abolished http://www.snouts-in-the-trough.com/archives/8608 Last night I found out how this will happen.

I attended a meeting held by a think tank called Policy Exchange. The subject was how to get more ordinary people to save more for their pensions. There were two kinds of attendees:

Firstly, some public-sector big bosses and middle-ranking bureaucrats from the Bank of England, the DWP and the financial regulators. The great Lord Turner, formerly boss of the totally ineffectual and probably institutionally corrupt and now abolished Financial Services Authority, was one of the speakers as was Tory MP and former Minister of State for Work and Pensions Mark Hoban. Note that all these people would have extremely generous final-salary, inflation-protected pensions (paid for by us) as well as a delightfully early retirement age.

The other group were people from pension fund managers eager to encourage the Government to make us save more as that meant more money for them in management fees.

The general theme of the meeting was that we ordinary people were not saving enough and had to be pushed or even coerced into saving more as our pensions were unaffordable. Moreover, too many of us were living too long and our care costs were becoming an intolerable burden on the state. Their own hugely generous, taxpayer-funded pensions and early retirement were, of course, completely affordable and well deserved after the huge contribution they had all made to our country.

The majority there felt that we should fully adopt the Australian model. There it’s compulsory for everyone to save 10% of their salary into a superannuation fund and (if I understand correctly) very few people get the Australian state pension as they are considered to have sufficient savings to provide for themselves. However, the great and the good (and of course well-pensioned) at the meeting realised that they couldn’t immediately force us plebs to save for our pension as we might realise that pension savings were just another tax in addition to income tax and NI. So, they planned to do what they called the “art of the possible” – move to compulsory pension saving in steps.

Step 1 – Introduce auto-enrolment for the Workplace Pension. This is already happening with 2.9 million workers in larger companies already signed up and millions more in smaller companies set to join over the next couple of years all paying about 8% (including employer contributions and tax rebates)

Step 2 – Once people get used to paying into a pension, move the goal posts – make paying about 6% compulsory and then auto-enrolling us to pay another 4% to 6% ” voluntarily” because the 8% of the current Workplace Pension was not sufficient to provide most people’s pensions

Step 3 – Cut the link between years of NI contributions and entitlement to the state pension, so that the state pension became a “benefit” (like unemployment benefit) rather than an “entitlement” based on years of NI contributions

Step 4 – Now that the state pension was a benefit, not an entitlement, only those with little to no pension savings would get the state pension

In the meantime, our masters would keep on increasing the age at which the state pension would be paid to us, while preserving their own early retirement opportunities.

This move towards compulsory saving and abolition of the state pension for all but the very poor will happen over several years – maybe 15 to 20. But it will happen as the state pension is unaffordable.

This means that, for anyone earning less than say £20,000, every pound they save into a pension scheme will result in reducing their eligibility for the state pension. They are being suckered.

Oh, and there was one other conclusion from the meeting – that setting a cap on the fees pension fund managers can charge us would “restrict financial innovation“. This was enthusiastically endorsed by the attendees from pension fund management companies like Schroders.

Are we being scammed? Yes we are!

(Sadly not a single person bought a copy of GREED UNLIMITED yesterday, so I’m not going to reach my absurdly low target of selling just one copy a day. Though my thanks to the reader who offered to buy his 3rd copy if it helped me fund the costs of running this website. But there’s no need to go that far. It’s not the money that’s important, it’s just my hurt pride that I wrote what I thought was a reasonable book and hardly anyone wanted to buy a copy)