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The View from the Shop FloorMark Richards 12:46 pm, Jun 8th 2010
Back in the 1990’s, when I was an IFA, I had a new client in Leeds. Car body repairs – the boss, his wife, a secretary and nine or ten lads. They started a pension scheme, and by and large the lads were sensible. A tenner a week, so with tax relief they had over fifty quid a month going into the pension. Add in the boss’s contribution and it was seventy or eighty. ‘Sound’ as they said on the shop floor.
Over the next ten years the company grew and grew. Three sites, eighty lads, the boss, finance director, estimators, secretaries. And yes, the boss’s wife – though she did manage the odd half-day in Harvey Nicks. But the attitude of the lads had changed significantly…
- pension? Can’t afford it, mate. Night out’s a hundred and fifty quid.
- pension? Bloke next door bought another house. That’s his pension.
- pension? Look, last year you told me I had three grand in my pension. So another thousand quid goes in and now you’re telling me I’ve got two thousand, eight hundred? Thanks a lot, pal.
- pension? Not bothering. Heard about this Government guarantee thing. Mate down the pub says the Government’ll keep me.
Over the course of a decade the combination of Gordon Brown’s tax raid, the property boom and stock market falls had turned them against pensions. They’d moved from seeing saving for retirement as a good thing to seeing it as a rip-off. Simply put, they didn’t trust pensions any more – and they didn’t trust the people (Government or financial services industry) who were telling them to save.
Something else was happening as well. They were getting disillusioned. They were beginning to realise they were on the wrong side of the pensions divide. It was the kids they’d been at school with that were causing the problem. The ones they’d laughed at – the ones who couldn’t play football, didn’t drink, didn’t chase girls. Who’d had to get a job pen-pushing at the town hall.
Now those kids had started talking about their index-linked pensions. About their boss who’d just taken early retirement. “Packed it in. Pension and a big fat lump sum for going early. Only 53…”
53? Bloody hell. Dave the panel beater was 55 wasn’t he? Still lying on his back on a stone floor all day, bashing away at a Mondeo. Saying he’d have to do it ’til he was 65.
‘Sound?’ Not any more. And it was a vicious circle. The more disillusioned they became the less they contributed. The less they contributed, the more they realised their pensions weren’t going to be worth much – and the more disillusioned they became.
So what’s the answer? Well, I know what my answer is – one uniform pension scheme which is the same for public and private sectors and with compulsory contributions. Just a shame it’s politically unworkable. Over to you, Mr Osborne…