Vir Cantium

I'm right, you know …

Always Someone Else’s Fault

1 plus 1 equals 3It must be great not having to hold down a proper job in order to make a living. You could be an academic research professor, for example, like George Irvin. Don’t blame the baby-boomers, he says, it’s all a right-wing conspiracy/Thatcher’s/the City’s fault. Take final-salary pensions for example:

Final salary-linked pensions have virtually disappeared in the UK because occupational pension savings were handed to City fund managers who made millions from investing them in stocks and shares. Some companies even took “pension holidays” to boost their share prices. When the market collapsed, so did “funded pensions”. Yes, of course there is a demographic problem, but most other EU countries have made reasonable provision for topping up their pay-as-you-go schemes.

Here we go.

No, George. Final salary-linked pensions have virtually disappeared because (a) they were fundamentally unsustainable, (b) a certain Labour chancellor helped himself, from them and their money-purchase counterparts, to £5bn a year (and still overspent the national budget) and (c) companies were forced to start loading a more realistic measure of the liabilities of said pensions onto their balance sheets after a change in the accounting rules.

By the way, if those evil satan-spawned “City fund managers” hadn’t invested them in stocks and shares, then the situation would have been even worse.

A funded pension won’t “collapse” because of any “market collapse”. As one nears retirement, more of the pot is transferred into cash and bonds, sheltering it from the fluctuations of the stock markets. The younger contributor will see their pension fund reduce in value, but they also have time to take advantage of market rises, and anyway what is the alternative? An unfunded scheme that forces a pensioners still-working colleagues to pay for his retirement – either through their own contributions or taxes? How very fair. Not.

Oh, and just because other EU countries have found some money to shovel into the black hole made reasonable provision for topping up these unsustainable schemes, it doesn’t mean they’re still unsustainable or not one small step removed from Ponzi schemes.

As for the basic point of George’s article, no I don’t blame the baby boomers. I blame those of the baby-boomers’ parents who voted for the socialists that dumped some nice but financially ill-thought out ideas on us.

H/t Tim, who has rounded on another excerpt.


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