Time for a stated pension strategy?

 

just-getting-by

We’re debating everything at the moment, from auto-enrolment to annuities, from the triple-lock to the state pension age. If you wanted to set  yourself up as a professional response writer, you could reflate our economy- Keynes style.

Everyone is laying in from the IFS (who are telling us the triple lock will kill us) to Ros Altmann who fears we will live for ever in care-homes no-one can afford.

Never before have we had more data on which to take decisions and never has there been so little long-term decision making who’s over-living and who’s getting short-measures on their state pension. Already you can use death calculators that can adjust your anticipated date of death by your behaviour on social media.

What is clear is that we can’t spend what we haven’t got FOREVER, which is what we appear to be doing as our national debt mounts, 6% of our GDP is being spent on paying people a state pensions and just for this to stay level, Paul Johnson (IFS) reckons we’d need to raise the retirement age to 70 within 40 years.

One crucial question that we are beginning to ask is whether, with limited financial resources but unlimited lifestyle data, we can pay people pensions that meet their lifestyle needs.

Short round fat pensions for those with little to live, long thin spaghetti pensions for those with longer life expectancies. Stella, my partner, says that no occupational pension should pay out beyond 85 (she’s chippy and convinced that her working-class genes are going to catch up with her by then). She also thinks that I should be tested for longevity and have my state pension squeezed like a tube of toothpaste till it stretches from one end to the other  of my over-entitled future.

Sir Steve Webb, arguing for the continuation of the triple-lock points out that flat-rate state pensions are redistributive to poor people (despite them living shorter). It’s true that if you are a low-earner £155 p.w. sounds a lot more then if it’s 20 minutes of your chargeable time.

You may ask where this is leading and frankly I don’t know. All these consultations getting people talking need someone of the calibre of Webb to do what Hutton did fifteen years ago and tell us what to do

Like any good strategy, Hutton II should start with what we have, work out what we want and chart the best way of getting there. And for goodness sake it should focus on just what we are going to do as the DB well runs dry and the DC pots overflow. I don’t think we are ready for a strategy that gives unlimited choice; I don’t see the State Pension as a flexible benefit but I float the idea that new technology is allowing us to understand our individual and societal financial liabilities in a way we had never imagined.

The rum and coke I am enjoying in the Safari Lounge of the Maharaja’s Express as we trundle through Uter Pradesh, is diminishing my life expectancy by a few seconds a sip, but my walk to and from the  Taj Mahal earlier this morning put minutes on me!

The new found interest we have in our bodies (Fitbits and all that) suggests that our long-term health is of primary consideration. Amazingly, our long-term wealth is something we feel we have less control over.

It would be a great thing if we could re-state the rules of engagement for those of us approaching, at or in retirement so that we can understand how we go forward together. If we don’t know what is fair, how can we manager fair shares? It seems to me critical that we have a social contract in place that includes pension freedom where appropriate and the reasonable force needed to ensure we have no one who is a burden on the State or in a state of personal dereliction.

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s