Much as I like Tom McPhail, his current campaign against the Government for selling rights to the state pension cheaper than rights to private pensions is fatuous.
Tom has it in his head that the Government Actuary is setting the rates at which we will be able to top-up our state pension as part of a great conspiracy against the private sector.
When of course the reason that private sector annuities are so unpopular is that they cannot match the efficiencies of the state!
Issuing gilts is what Governments do, and issuing gilts which include some longevity insurance is not that hard. Just go to the Office of National Statistics and check when people are living to, draw a line through changes in those rates (over the past 100 years) and Bob’s your uncle, you know how to price your longevity gilt (which is what a pound’s worth of state pension is.
Think of the Government as a factory outlet which operates on a not for profit basis and you get why buying from the issuer of gilts, rather than from someone multiple intermediaries away from issuance, is always a good idea.
The Government has not signed a non-compete clause with Hargreaves Lansdowne
– or with the rest of the Financial Services industry for that matter!
It is the Government Actuary’s job to knock out pension at a factory gate price which properly reflects the interests of all tax-payers, those on the sell and buy side.
It is not GAD’s job to stand behind the carthorse and sweep up the manure.
The state should sell rights to the state pension because it can, because these rights are necessarily good value and because people have far too much cash in retirement (mostly as a result of pension freedoms) and are looking for a sensible way to turn it into an income that lives as long as they do.
Infact, the slogan “an income that lives as long as you do” is so much the best description of what a pension is , that I am curating it to Tom – so he can sell more of his expensive private annuities.
Me – well I wish I could be retiring today so I could be buying some of this nice cheap state pension and even better – deferring my state pension – like all the smart people at the Government Actuary do!