Tell us the optimistic truth about our pensions

As part of our usual desire to tell ourselves that we are a hopeless nation, heading for the skip, good for nothing losers, we frequently like to proclaim that our pension system is broken.

It’s unaffordable.

It’s a burden we are leaving for our grandchildren, so we must make ourselves poorer now to save them. (That they will one day be old and might be glad for our present entitlements is never part of the conversation.)

The Times had a look at all that last weekend, asking are public sector pensions unaffordable?

Steve Webb, who used to be pension minister and has spent his entire working life pondering this stuff, gave the best answer.

His point was that fearful projections of the future cost of pensions assume the bill arrives in one go.

He writes: “If you were trying to decide if you could afford this week’s shopping, you would not add up all the shopping bills for the rest of your life, obtain a big scary number and decide to stay at home. Yet that is exactly what people do when looking at the cost of public sector pensions.”

So, don’t go to Tesco at the weekend for your family shop. Because the £120 bill is simply unaffordable, if you factor in every single other Tesco visit for the rest of your life and act like you have to pay it now.

The barely muttered truth about our pensions, public and unfunded, public and funded, private and funded, is that we’re doing pretty well.

This is what our financial services industry is for. And it’s really good at it.

The pensions and insurance industry has a vested interest in telling us that, unless we buy more of what it is selling, we shall starve from day one of our retirement.

That doesn’t make it so; in fact, it is disrespectful to the work those firms have done in persuading us to pay in, and looking after the money once we have.

The naysayers will argue we have an ageing population. And in the future there will be fewer young people paying into the system.

They say that like it’s a clever, killer point rather than an obvious administrative matter for which we have decades to prepare.

There are other confusions here about what pensions are and what they are for.

Two things: 1) They are wages deferred. We take home less now so we can have more later. 2) They are a promise to pay. And the rules are rightly very tight on this. It is hard to get out of paying a pension you owe. As it should be.

Take the CEO challenge here. If a big company decided to cut a CEOs pension fund after the fact, the CEO would sue. Moreover, he would win. He would get his money.

So shall we.

The doomster trick is for people who do not know what will happen next week to make a projection of how the world will look in fifty-years time.

They have no more idea about 2076 than they do tomorrow.

It would be really good to hear from pension experts beyond Steve Webb explaining why we mostly have this more right than wrong, rather than to spin trumped up trillion pound liabilities as if they spell out economic doom.

Last week, Tony Blair said our future pensions should be cut.

His?

Oh, his is just fine. It shall not be touched.

Please send candidates for press release of the day to:

Simon.english@roxhillmedia.com