I’d like to talk about a worrying trend that is appearing at present that touches all our lives and that is aging and pensions. As time passes we get older and at some point in our lives we will become too old and worn out with the cares of life to work for a living and will need some form of financial support. In some countries around the world governments make provision for this and pay out state pensions, many other countries do not and workers have to make their own provision and take out a pension with a company or, if they are lucky enough their employer will have a company pension into which both the employer and employee will pay and at the end of which the employee will be able to take out his or her “pot” (as it pot of money) and get a pension.
In the UK there has been a mix of pension provision. The state pays a basic pension which in recent years has risen in line with those on the European Continent, but this is still quite basic. There are also personal pensions into which you take out with an insurance company and pay into every month, your employer can also pay into it, which of course increases the amount of money that can be invested and also grow your pension pot. There are also company pensions into which both employer and employee pay into, as described above. It is the latter type of pension that I want to talk about.
In 1991 a certain Robert Maxwell died at sea in the Canary Islands, falling off a boat. In the months that followed it transpired that the company pension into which 30,000 employees of the Mirror Group had faithfully paid contributions honestly thinking they would be able to be comfortable in their old age had been plundered to the tune of £440 million. The money was repaid, although not in full, partly by the Mirror Group and partly by the government.
All’s well and good you say. What has that to do with the present day? Last month a beloved shop that has been a feature of high streets up and down the UK, BHS or British Home Stores, as gone into administration. It was sold on 12 March 2015 by Philip Green for the nominal sum of £1. BHS opened its first store in Brixton in 1928 selling goods for a shilling (£2 in todays money) and was able to raise its price to five shillings (the equivalent of £10 in today’s money). As BHS went into administration it was also revealed that it has debts of £1.3 billion including £571 million in pension liabilities. It was advised by Goldman Sachs and, as a responsibility to the 11,000 employees that face redundancy there are questions that need to be answered.
Former owner of BHS Philip Green has been summoned to a hearing by MPs of the Select Committee at the House of Commons and has arrogantly called for the resignation of the Chair of that committee, Frank Field. Goldman Sachs has also been called to appear before the Select Committee at the House of Commons, they have declined and asked that written evidence only is given to the Committee. In effect these people see no reason to be questioned in person by a group of MPs who will ask what happened, why, which people played a part in the demise of the company and what steps will be taken to restore the pension fund of those past and present employees who have paid into it.
This raises the question at what point do pensions form just another asset that a company can use to shore up its financial difficulties without knowledge or permission of those who have paid into it in good faith? If it is the case that pensions are there to be plundered by whoever wishes to do so then those making the contributions are correct in saying the whole idea of making provision for one’s old age is a mistake as there cannot be any guarantee that there will be any provision when someone reaches retirement age.
At this stage the majority of the burden for providing a pension in old age should properly fall onto the state and government. Pensions should be raised to a level whereby people should be able to live comfortably without worrying that they cannot afford to heat their homes or eat, that when large expenses present themselves, they are able to meet them and just enjoy their lives. After all, people have paid taxes that governments have had the benefit of all their working lives, it is time for the Government to return some of that benefit to the people who have paid that money. We should aim to have an equitable society in which everyone is provided for.
Certainly in the UK we are asked to pay huge amounts of tax, much of which is squandered by MPs who seem to think it is their own private fund to do as they wish with, when a good part of it should be returned to people to enable them to live a good life.
It is also incredibly arrogant of companies who have spent years lobbying governments across the world for favourable conditions, subsidies and perks in order for them to start up and continue their businesses who, when things go wrong, consider themselves not to be accountable for their actions, but to leave governments to pick up the pieces of their bad management. Particularly so for banking firms such as Goldman Sachs who were happy to take out their begging bowls in 2008 when their bets didn’t pay off, asked governments to help them out. Those same firms are accountable not just to governments, but to their customers in the same way other institutions and businesses are. Admittedly Goldman Sachs didn’t need to take out their begging bowls, but so many other banking firms did. The banking sector has done nothing to reform itself since that time and has continued as though nothing has changed. Such arrogance will return to bite them when the time emerges for a further financial correction which will come sooner than we think.