Boomers are farmers.

Screenshot 2020-01-05 at 07.32.59.png

Fontmell – in North Dorset

I grew up in a rural area of Dorset where the farmers were considered rich but acted poor. The farmers explained that though they might own the land, they could only extract from it the income that came from dairy and arable products they could sell. The farms were generally in the family and  – even when the land was not owned but rented from the County Council, it was not seen as a realisable asset.

That was how I learned about how businesses worked. You were successful on the basis of your husbandry, the land remained much the same.

Of course the land wasn’t all the same. Some of the most valuable land in the area of North Dorset I grew up in , is the \Gore Farm and Springhead Estate, which was farmed by Henry, Gardniner –  Rolf Gardiner and then his son – the conductor – John Elliot Gardiner – organically.

Rolf Gardiner founded the Soil Association which has been improving our land for sixy years.

The Gardiner’s land has not seen pesticides since the war.  John was known as “uphill gardener” for farming the wrong way but that was some time ago, people now see the family as visionary. The land is valuable because what it produces is pure and sells at a premium.

I hope that farms such as the Gardiners continue to generate good income and do not get “realised” for short term gain. The rural heritage of North Dorset is valuable to the nation as well as the local community. The downs around Fontmell are owned by the National Trust and support the most delicate eco-system of orchids, butterflies as well as magnificent vistas of Melbury , Wind Green and in the distance Hod and Hambledon.

They are a great treasure, enjoyed for free by people like these.

melbury 2.jpg

On Fontmell Down

 


How we value our wealth

I give North Dorset – and in particular Springhead – as an example of wealth which is shared by family , community and nation. It is not realisable wealth, such is much of the wealth of this nation. Recently there have been attempts to analyse how our wealth is owned. This chart is from the Office of National Statistics and has caused some comment on social media.

Screenshot 2020-01-05 at 05.54.08.png

The chief source of wealth for the older generations in property and pensions. The former is inheritable, the latter less so (and in the case of DB – not at all).

But what this chart does not show is entitlement. I don’t mean by this the entitlement to roam on Fontmell Down (which has no economic value) but our general entitlement to the State Pension, which is based not on what you’ve earned but on how long you’ve  been available for work.

The economic value of the State Pension is probably around £270,000, based on the cost of purchasing an annuity as its replacement. One of the reasons that the boomers are so OK is that they did not have to pay so much for their parents pensions and are about to get supported by their kids to an unprecedented degree. Indeed , if you add in the cost of healthcare, today’s boomer (represented by the blue line) is entitling itself to a further claim on their children that eats into the inheritable wealth transfer. I fully expect to see housing wealth paying for the NHS and social care for the rest of my life.

The taxation of excess inheritable wealth is tiny. Although Inheritance tax receipts hit a record £5.4bn in 2018/19, (up from £5.2bn the previous tax year, they are still only expected to reach £10bn per year by 2030. These are tiny amounts compared to the wealth of the nation.

The boomers are so “ok” because they are getting a free ride , not just on pension and healthcare but on the property transfer. The question is whether they have earned this free ride or simply bestowed it upon themselves by means of grants from the public purse.


The sustainable model I grew up with

My childhood economic model saw most people working and taxation looking after those who couldn’t work , through sickness or age.

It saw property as both the platform for earning (my Dad was a doctor and worked from home as much as surgery or hospital) and as a source of income for the farmers.

This is not as feudal as it seems, farmers went bust and farms were sold, people bought and sold houses, but there was a solidity about this rural society and it’s still there today.

The economic stability of the society I’ve grown up in , in post-war Britain, has been entirely based on work and on the income it produces to citizens and – through taxation- to the exchequer.

It is entirely right that the IFS and others question whether we are living within our means or living on someone else’s. It is absolutely right that we do not over spend as we could on state pensions. It is right that we have a grand economic model which is explainable to people like me. It is absolutely right that we have people like Veronica Humble and Stuart McDonald chew the numbers in public.


Valuing what we’ve got.

John Ralfe , as usual, asks the critical question,

I take it , he’s asking whether we should be showing the economic value of a pension in payment to the pensioner, or annuitant, in the same way we show the cash balance of a DC account.

Would it be helpful for an estimate of the residual value of your state pension be available to pensioners? It might be a very good idea for it to be accessible on your pensions dashboard, if only to make you wake up to the genorosity of your children for paying it. The same might be said for public sector pensions and for corporate DB pensions in payment.

We massively under value the pensions we have and over-value the economic value of the property we own. We over value DC and under value DB and it’s usually for the same reason, we confuse wealth with income.

Farmers always feel poor

It was (and still is) a standing joke that farmers always moan about how little income of they get. I suspect that they are partly to blame, they know their assets rarely return them the income they see ripped out of the investments made by those in private equity.

That is because of the sustainable husbandry they pursue, if they wanted to get rich they’d sell land for golf-course, industrial units or housing.  Many farmers do.

But many, like the Gardiner family, have found the long term social impact of good husbandry pays dividends over time.

We can see the impact of poor husbandry in the current state of the planet, but I’m pleased to hear that thanks to Britain’s efforts to reforest-ate, we are now returning to the levels of woodland we last saw in Medieval times.

Farmers are the guardians of this heritage and we owe the good ones a big debt of thanks.


So do pensioners

Like farmers, pensioners enjoy wealth which they cannot access, especially if it’s the wealth of the nation paid to them through pay as you go schemes.

Those who have their wealth in DC pensions , are now able to use their money as they like. They can choose to invest in Australian coal-ming or in sustainable housing in Salford. They are like farmers.

The wealth of pensioners is in the time they have to do things like walk the downs at Fontmell or to ride the 50 Breezer round Poole Harbour – they enjoy and should value their time, they have earned it and they have earned the right to healthcare, free at the point of delivery.

But pensioners, and those – like me- who are about to be pensioners, must take the responsibility to leave the planet as they found it.

And we must not be too greedy in their demands on their children. We must be prepared to pay more taxes on our wealth if it turns out we are getting too much of the pie. We have to accept that being an “OK-boomer” is not acceptable, if we show no husbandry.

In short, this is a message to my generation – to act as farmers and not spoil the heritage we leave our children.

 

Screenshot 2020-01-05 at 07.35.39.png

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 and tagged , , , , , , , , . Bookmark the permalink.

2 Responses to Boomers are farmers.

  1. Jnamdoc says:

    Yes, the Boomers have pulled up the drawbridge. You’ve got to consider who at all is interested in pension regulations – and it’s not the young. The sense of entitlement and self interest amongst the grey haired is quite incredible. They – as it is they that make the regs- won’t put a value on pensions least the younger wake up to bill they have been landed with. But, wake up they will – and they will have no qualms about quashing tho preferential payments the Boomers have awarded only for themselves. The first phase is the soft-nationalist of legacy DB pensions (I think it’s euphemistically called ‘de-risking’), which would support a large scale downgrading of entitlement – probably through a definitional changed to the indexed linkage ie eliminating the pension debts by inflation.

  2. Ireland allowed pension increase ‘promises’ to be torn up in certain circumstances in order to save DB schemes from collapse. They also taxed pension wealth via an annual levy. Many a way of redressing the balance if ever required. But it’s usually the pension arrangements of politicians, top civil servants and judges that largely remain intact when the trimming starts – funny that.

Leave a Reply