Last month it was riots, yesterday it was FTSE 100 executives’ pensions. Is our society unfair? And are we doing better or worse in pensions?
Forget the (welfare-abusing) rioters’ distracting talk of expense-claiming politicians or bailed out banksters, here’s a simple way to think about the bigger picture. All you need is your imagination and a couple of minutes.
Now, mentally line up the whole UK population, poorest on the left, richest on the right, spaced out in proportion to income (or wealth if you prefer). Don’t turn all social scientist on me and start pondering how spread out the line is or should be, just picture it – quickly.
Ok, now mentally re-arrange your huge line according to (expected) income in retirement (or, if you want, the capital value of the pension pot). If you’re an actuary, adjust for retirement age, life expectancy, indexation, spouse’s benefits and so on. Don’t forget the state pension in your calculations either.
Done that yet? Ok, 2 simple questions for you:
1) Overall, are we now standing closer together or further apart?
2) What will the planned changes to pensions over the next few years – auto-enrolment, changes to state pension age and the state pension itself, public sector pension reform etc – do to the line up?
In pensions, should we be rioting or celebrating?