A Charter for Pensioners
A large group of 18 million workers would have little difficulty in grabbing the attention of the government. But what if the 18 million happen to be pensioners? They cannot threaten to stop work and down tools since they already have done. They are not likely to rampage through the streets and cause mayhem so what recourse is left to them? There is one important tool they can still use, namely their vote!
Pensioners have some major grievances that have been largely ignored by the two big parties. They tend not to make a lot of noise and have no all-embracing organisation to speak for them. So what are the grievances?
- UK State Pensions are the lowest among the 20 developed countries in the OECD. That is, lowest in terms of the percentage of average wages in the respective countries. Top of the list is the Netherlands where the state pension is 100% of the average wage. The UK is at the bottom of the list and on a par with Mexico at just 29%. (Figures taken from a Financial Times report.)
- The ‘triple lock’ is a triple trap. The triple lock was brought in by the coalition government in 2011 to ensure that pensions kept up with inflation. It was welcomed as a step forward and indeed provides a relatively good deal while inflation is low. But it still leads to an ever-growing gap between the rich and the poor. Why? Because a 2.5% increase on a small pension produces a much smaller amount of money than applying the same percentage to the average weekly wage as it stands, due to its representing only 29% of the average age. 2.5% of £168 = £4.20, whereas 2.5% of £579 = £14.48. When you compound those figures over a number of years the gap becomes significant in terms of purchasing power. The higher paid of course see their incomes growing at a faster pace again. It’s a bit like the expanding universe with pensioners close to motionless centre.
Consultation is currently taking place with regard to reform of the Retail Price Index which has an impact in a number of areas including pensions. Any changes would be implemented from 2025. This needs watching, bearing in mind the gap-widening impact of a flat percentage.
- 4% of State Pensions are ‘frozen’ Such is the fate of some 550,000 British pensioners who live overseas whether by choice or circumstances in certain countries. Their pensions are frozen at the level prevailing when they left the UK. Some very elderly pensioners have to live on as little as £40 a week or less. This is one of the high priority issues on which the Lib Dems Overseas are campaigning.
- Pensions Freedom – A potential time bomb Prior to 2015 retirees without a final salary scheme were obliged to buy annuities from accumulated company pension pots. The problem with annuities in times of low interest rates is that the annual income is very small, albeit guaranteed for life. Without warning to the pensions industry in 2015 the government suddenly granted ‘pensions freedom’ to those reaching or having reached 55 so they could decide for themselves how to spend or invest their money.
Some were able to handle the challenge responsibly but not all sought or obtained sound financial advice.
Those who cashed in immediately were obliged to pay a tax bill in the region of 30%. This meant an immediate benefit for the government as the Treasury received a substantial windfall. But the potential damage to the lives of many pensioners and the future burden on the state was ignored.
Since that decision in 2015 some £33 billion has been withdrawn from pensions (per HMRC January 2020). Much of that money will have been spent and will no longer be available to support the pensioners in old age. Those who at least have attempted to access their pensions sensibly over time are still going to run into trouble. According to the British Association of Insurers withdrawal rates have reached an annual rate of 8% in 40% of the cases. To ensure the longevity of the pension the withdrawal rate should be no more than 3.5%. The latest market crash resulting from the global impact of the coronavirus has made the situation much worse.
Almost 50% of pensioners have taken no advice on pensions freedoms. Of those who took advice, according to a Financial Times report, an alleged 80% of financial firms gave them bad advice! Thousands of pensioners have also fallen victim to fraud and scams, and this issue needs urgent attention.
According to a study by the Centre for Economics and Business Research, the UK’s ability to support millions of retired people will collapse by 2029 unless the government takes decisive action.
Age discrimination in employment This is not an issue for older workers alone; discrimination can start as early as 40. However, the fact is that many pensioners would dearly love to continue working on reaching retirement age. Some have little choice but to continue working, if they are able to do so. For some people the word retirement is a death sentence. Most people will know of cases where, after a lifetime of hard work, people succumb to an early death when their routine comes to an end. I know a case of a police inspector who, while previously healthy, died of a heart attack the day after he retired.
The recent government measures to limit non-essential immigration opens new opportunities, with retraining where necessary, for retirees to take on new challenges and enter different fields. Work hours can be reduced if preferred and employers could be given incentives and a level of protection so they are not liable for benefits such as sick and holiday pay.
There are already many opportunities. At question time in Parliament on 11th March Ed Davey pointed to a care sector that was falling apart with some 120,000 vacancies. There must be many active pensioners who could help to fill these gaps alone. Age discrimination is less apparent in the US. I know an American lawyer who has retired from practice and has started a new career as a long-distance truck driver.
The Japanese government has already urged companies to secure employment opportunities for workers up to the age of 70 to tackle Japan’s manpower shortage and to ease pressure on the social security system.
The outcome of incentivising retirees and employers would result in an army of pensioners that continues to be productive and contribute to the economy.
Health and Lifestyle I have not lived in the UK for a long time but I understand there is now a greater emphasis on preventive medicine, which is good news. I believe this could be widened for pensioners so they have access to a range of professionals who can advise on lifestyle and nutrition. Local authorities should be encouraged to offer leisure facilities to pensioners that can be discounted at quiet times of the day. The object would be to achieve a net saving to the NHS by maintaining higher standards of health and avoiding some of the common ailments that heavily burden the system.
End homelessness for all, but particularly pensioners A decade ago Boris Johnson, who was Mayor of London at the time, pledged to end rough sleeping in the city within three years. At the time, 3,673 persons were recorded as rough sleepers. The pledge came to nothing. Ten years later the figure had risen by close to 250% to a recorded figure of 8,855.
Homelessness in general is a global problem. Apart from multiple factors including mental illness, drug addiction, family breakdown, unemployment and such like, in the UK there are government policy-related issues such as unaffordable housing affecting even those who are employed. It is a low priority for a Conservative government that can allocate £100 billion to a rail project that will include knocking 40 minutes off a train journey from London to Birmingham. Even the opposition Labour party has failed to make homelessness a major issue.
The Guardian has published some excellent articles on the subject with in-depth stories on the individual tragedies behind some of the motionless bodies in doorways.
Could this be the fate of one of your parents or grandparents or even yourself? Hard to imagine, but these people must have children, grandchildren or siblings somewhere.
The Lib Dems should make it one of their major campaign issues. And top priority should be given to the large number of elderly people who are homeless as they are the most vulnerable and the ones most likely to be dying on the streets.
Conclusion
Demographics in the developed and even the developing world are changing. As a result of longer life expectations the percentage of retired people compared to those working is growing at a rapid pace. Support of the elderly is becoming an unsustainable burden for many governments.
In the UK the ‘golden age’ for retirees has passed, since salary-related pensions can no longer be sustained by companies. So we are seeing a gradual deterioration in the income and benefits for pensioners relative to the general population and to those in other western countries.
Advocating higher income and benefits is an old trick to win votes. It doesn’t work anymore as the Labour party discovered to its cost in the last election. People realise that the money has to come from somewhere.
The solutions I have suggested, which include encouraging people to remain longer in the workforce as in Japan, albeit in a totally new capacity, would help to pay for improved pensions and services. It would also ease the problem of the many jobs that are currently vacant as well as those that can no longer be filled by immigrants who are now excluded as part of the Brexit fallout.
Some of the more active pensioners could be employed by the social services to assist in understaffed care homes and in projects to help end homelessness. Older workers are likely to have more empathy for those who are even older or less fortunate than them.
Above all, taking the many issues into account, finding solutions to them will help raise incomes and empower pensioners to access a wider range of options including the possibility, for those who desire, to extend their active and productive years.
If pensioners recognise that achieving these outcomes is a result of Lib Dem initiatives then many of their 18 million votes will reflect that recognition.
By the way, I am a UK pensioner, a frozen pensioner and a working pensioner!
Colin Bloodworth
Jakarta, March 2020
Presentation to the AGM of "British Pensions in Australia" (BPiA)
Lord Chris Rennard gave a presentation last month at the AGM of "British Pensions in Australia". The following is the link including access to the video of the presentation.
https://bpia.org.au/lord-rennard-presentaion-to-2022-bpia-agm/
December, 2022
