The news on our economy is unexpectedly good. The FT, not known for being optimistic is well..optimistic about the UK economy
Scroll to the bottom of this blog to see why our economy is feeling buoyant to the FT; So is Will Hutton.
Actually the news from the IMF is that consumers are behaving as if we are going bust while in practice we are doing much better than most other countries we call our peers.
It’s said in that little bit of commentary beneath the picture. We do not have the problems of America and Europe where there is violence in thought and in behaviour.
We have a tolerant society that is feeling safe in its leadership for the first time in a decade. This is a good time to be optimistic.
I say this at a time when our pension pots are growing faster than any sustained period I can remember. The resilience of our private sector DB funds is partly due to high discount rates but also growth in what’s left of their growth stocks and those few who are still open (Rail, USS and LGPS) are doing very nicely thank you.
The one area that is giving people reason to be worried is residential property, where prices are falling and where prices are likely to fall further as mortgages stay high and increase for those coming off low fixed rate deals. Housing is expensive to rent and it’s expensive for those in flats who are being rippled off by service charges and ground rents. Housing is expensive even for pensioners who are borrowing against their equity (usually to meet the cost of care).
As I said yesterday, you can’t buy a sausage with a brick and goodness knows , sausages are expensive in these inflationary days. The thing that protects older people’s futures is inflation proofed income which is what we get (times 3) from the state pension and will get from our DC guided retirement and our CDC pensions.
What is needed is optimism about pensions and trust in the private and public pension system. The public system of unfunded defined benefit pensions is trusted (despite Capita’s problems) but there is little trust in private pensions. It is no good paying more into DC savings plans, it’s like pouring water into a broken bucket.
What is needed for this country is optimism that in the long term we will do well, will find ways to use changes in technology, in climate change protection and in personal productivity to afford the kind of retirement we hope for and have lost trust in.
Alongside housing and healthcare, the pensions system is one of the three things that needs to improve in the years to come and it’s no good for people who are coming to the end of their careers drawing up the bridge and denying our children access to the castle where we sit. That’s how I think of de-risking everything!
We should not de-risk our economy by refusing to invest in the future and we should use the capital we have within our funded pension system with confidence and optimism. We must stop sending money off to the other side of the pond as if they are the generator’s of growth. Rather than pouring money into a broken bucket we must mend or replace the bucket and use it.
That means organising among other things a kind of fund to pay collective pensions with a simple single bucket that waters everything in the garden fairly (do I have to explain what watering the garden means in pension terms? Thank you – that’s no!). If not pensions from a single collective bucket, a lot of smaller buckets that while less efficient can be personalised and used for individual needs,
I’m sorry to go on about this but it seems important to get the big picture from time to time and it seems to be a good time now. Now is as good as it has been for our economy and though it is horrid in a lot of places in the world, we are lucky to be living in Britain.
Appendix – two reasons driving FT’s optimism about our economy
The first is our professional services – benefiting from rollout of AI
The second is that we are advising the world creating a services trade surpluses. We are not making much but we are using our brains and selling them well to others.
