In the not too distant past, many people were obliged to literally work until they dropped to try and maintain an adequate standard of living for themselves and their families. Some of us have been fortunate enough to live in relatively civilised and enlightened societies which have enshrined the right to retire and provided an income to support that choice. This is the basic philosophy behind providing a state pension.
Britain played in leading role in introducing progressive legislation to provide state pensions and later on this was augmented by incentives to support our own retirement aims with private pension schemes. A number of useful tax breaks still exist for pension contributions although recent events have shown us that pension funds cannot rise indefinitely and apparently defy gravity. At some point, many will have to reflect the poor performance of their underlying investments.
The performance of private pension funds was adversely affected by the1997 Labour Government abolishing tax relief on the income that they generated. This £5 billion annual raid on pensions was not even in their manifesto, which adds insult to injury. Arguably this change in taxation policy damaged stock market growth for many years. That might sound like it does not matter on a presumption that many investors are just fat cats but this is simply not true. A compromised stock market with weak growth affects us all, particularly those people who worked and saved hard in order to supplement their retirement income. Legitimate hopes and aspirations can be totally dashed when a government does not keep faith with the people who ultimately fund the government’s activities.
Couple the assault on private pension funds with the dismal handling of the economy and you get a real double impact, which has become apparent with references to again raising the normal retirement age. To have to contemplate this is a further measure of the economic failure of the previous government. We have millions of people who had with great belief and trust contributed to their retirement pots only to be told, “You might have to wait a while longer.”
As relatively mild-mannered Brits, we have not exactly taken to the streets at this point like the French have, but the seriousness of this issue should not be underplayed. It is all very well writing about disappointment but we should also take a forward look. In reviving the economy and our future prospects, the new Coalition government needs to articulate its own optimistic vision, the light at the end of the tunnel. That aspiration should ultimately include restoring a fair, equitable and progressive pensions environment that we can all believe in and trust once again.
Councillor Duncan Crow
Deputy Leader of Crawley Borough Council.
8th September 2010