Notes of the presentation on the Crawley Pensions Panel reviewed on 24/10/05 by David Ashton of CPAG (Crawley Pensioners Action Group)
Introduction
The Crawley Pensions Panel met on October 7th 2005, the meeting was called, facilitated and coordinated by the office of the Crawley MP Laura Moffatt. Pensions panels are feeding back their comments in parallel with the Adair Turner pensions review. The Adair Turner review is focussed upon the future of pensions whereas many of today's pensioners have more immediate concerns. Paradoxically, today's concerns will be easier to resolve once the future is sorted out.
Mrs Moffatt is a Labour MP and has represented Crawley since the New Labour landslide of May 1997. Prior to that Crawley was represented by conservative MP Nicholas Soames (who was, or is, shadow Defence Secretary). Since 1997 we have had two further elections during which the labour majority has diminished. In the 2005 election a couple of recounts were needed because the labour majority was 37 which is the lowest in the country.
Personally, I have little faith in party politics and ideology which seem to lead to unproductive arguments. I find it more useful to regard the political system as a system of processes rather than differing ideologies. Processes have outputs rather like a production line or a factory. Envisage a New Labour factory, a Conservative factory and a Lib Dem factory and pick the product best for you, just like buying a washing machine or an insurance policy. So far, on pensions none of the factories have done too well.
The Panel
The attendees at the October 7th meeting comprised 7 men and 7 women. There were (including myself) four retired 'pensioners', two Union people (from UNISON), three representatives from small businesses (including two from the Federation of Small businesses), two college lecturers and a 19 year old student who was very interested in starting a pension so I gave her a CPAG paper on this subject. This girl was a lively Tamil from Sri Lanka. In addition we had two from 'B, C, and E' who are in the business of arranging pensions so, the financial services industry was represented. I felt that the wealth creating sections of industry was under-represented but I have some bias because that is where I spent my working life. The panel was numerically weighted to the public sector. It was an amicable affair and different points of view were aired.
Prior to the meeting we had been sent statistics relating to demographics, immigration, birth-rates and the cost of pensions. We also received two pages of comment and data from the Equal Opportunities Commission which related to women's lower retirement incomes.
Our MP's office had also conducted a survey by sending out a questionnaire, but, by October 7th they had only received 75 responses. They gave us the results. I am over-simplifying them but, they indicated that over 95% of respondents did NOT want pensioners to become poorer relative to the rest of the population. Roughly half of the respondents indicated thought that taxes/National Insurance contributions should rise but that adding pensioners to this option showed about 70% in favour. Only 24% thought that savings should rise, and only 15% thought that retirement ages should rise. The results of this survey are however, more complex than I show here and merit closer scrutiny. Some responses (for example on savings) seemed contradictory. One of our tasks was to analyse them and give our views.
We were split into two groups denoted Red and Green. I was in the Green group. We discussed the results and fed back our comments and then the two groups re-convened so the analysis could be documented. At first, discussions were inhibited by the closed questions format but we broke out of that fairly quickly. However, we did not (for example) discuss the way that the National Insurance Fund surplus is annually swept away into general taxation.
We discussed the contradictory government signal insofar as they make it clear they would like us to save and participate in private pensions, but they then demotivate people from doing so by giving away far more on means-tested benefits than they do on the state pension. For example, under the tax credit system the weekly income for a non-working 'pensioner' is about 33% higher than it is for someone who has made full National Insurance contributions. In addition of course, the means-tested elements rise faster than the state pension and it is a 'gateway' benefit for such things as Council Tax and Housing benefit. The leading Actuary company Mercer estimate that such benefits amount to a capital equivalence of some £185,000. Thus in its most simplistic form the political process has produced a message that seems to be "Save for your retirement, but if you do n't bother we will give to £185,000" This must be a de-motivator, and results from the British system of intertwined taxes, social security and state pension - the most complex system in the developed world.
We had one or two revealing diversions that indicated potential schisms. For example, we slipped over briefly on to Council Tax. One of the college lecturers said that it was right that pensioners should realize the capital on their homes in order to pay the tax. This would mean for some selling up and sizing down. We did not discuss this is depth (it was not what we were there for) however, most retired people I know would strongly disagree with this. The same lady said that we were much better off than pensioners in Russia who were begging on the streets. Out of interest, at lunch time I asked her what parts of Russia she had visited and it emerged she had never been there. She had however, spoken earlier of Russia with what sounded like informed knowledge. I have been to Russia at least three times, all before the fall of communism and I saw frequent signs of poverty and alcoholism (including a bunch of cops sozzled out of their minds whilst on duty) There were many things we could have talked over if we had the time.
The small business people found pensions a complex problem for them to deal with, the 'contracting out' provisions being a nightmare to administrate. Large companies can afford the overhead costs of running a Company pension scheme, but, it is a problem for small businesses. This may affect future economic growth which will depend upon the Small Medium Enterprises (SME's). They are the engines of our economic future rather than the big companies. However, even big companies find pensions a handful. Examples include General Motors (a vast multi-national) say that the pensions burden from former employees is gradually driving them out of business. British Airways struggles with a pensions deficit of £1.6 billion.
The UNISON representatives worked for Crawley Borough Council and were pre-occupied with government moves to change their pension benefits, especially raising the age of retirement to line up with the private sector. I asked whether or not they had a pensions deficit and they thought that in Crawley there was no deficit. I did not mention it, but I believe that overall local government has a significant deficit and therefore expect that it would be 'pooled' rather like Council House rents! (in Crawley 33% of all council tenants payments are sent off to Central Government) The UNISON reps did not think they were being given enough time to deal with government proposals and this could result in industrial action. However, 5 days later an interim agreement was reached, this began to erode retirement-at-60 but was less onerous than UNISON feared. This agreement was attacked in much of the media so it is likely the government will broach it again.
A retired policeman made the point that the financial impact of the pensions problem was massive and completely under-estimated by government and the general public. I thought he was dead right about that. Various other people made the point that education about the financing of pensions and other matters was critical. It was pointed out that things like loans were pushed very hard especially by day-time TV advertising whereas the benefits of savings were not. At this point the adverse effect of means-testing arose again.
Recommendations included education in matters financial, finding ways of ending means-testing and encouraging personal savings. There was little or no enthusiasm for higher taxation, and, it was felt that compulsory pension saving might only be regarded as such. The prospect of a 'Citizen's pension' (based on residence rather than NIC contributions) was floated by Mrs Moffatt. We touched upon prospects of later retirement. We felt that it would be wise for any barriers to later retirement to be lifted but had caveats about compulsion. For example, with a hard physical job this would be tough - as might be a high pressure management job. However for example, many clerical jobs would be easier. However, I currently I await the formal feedback from Mrs Moffatt's office.
We had a pleasant buffet lunch prepared by Mrs Moffatt's parents. Mrs Moffat thanked us for our time and we went home.
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