Think pensions

Sunday, June 28th, 2009 - career management, Employment, Job Interview, job offers, politics, sunday thoughts

Think pensions

And they reminisce over better days....

If like me you have been reading the Sunday Newspapers today in the wondrous sun, either relaxing or getting the BBQ clean, then one of the subjects you will have picked up on is pensions

What have sunny days, an English summer, and BBQ’s got to do with a pension?

Pretty simple really: now it is accepted that the economic crisis won’t be quite as bad as predicted, and probably the worst of it economically is over – no one doubts the worse points in unemployment levels still lay ahead; the media commentary debate is about focusing on defining forward strategy choices (can’t do everything), and consequences. One agenda is recognising that an ageing population and the problems that brings to the already huge UK debt mountain

Return to tax and spend?

Simple statistics show that under the past 12years of a Labour government, public sector spend has tripled – gulp. Now that is not such a bad thing, as that has got us to the point of spending on public services what our European colleagues are spending on average. But, they pay 10% extra in taxation per annum. Hence, the initial debate was, apart from reducing our debt mountain in stabilising the banking system, do we cut or do we tax more?

The debate on taxing more was dismissed, as that would take the wind out of any recovery, if and when it came. So the debate has moved now to cuts. Although many see this as a bad debate, I don’t.

Two things I really believe in keep me resident in the UK, and both stem from experiences in the United States:

  • The NHS. Watching an ambulance crew in New York in the early 1990’s wait for the the local free hospital ambulance to arrive while an old lady who had been in an accident suffered showed me how good a free to all at the point of delivery system was
  • The state benefit system: a single 1.5mile drive down a street in Miami one sunny Sunday morning – nice fresh primary colours buildings either end of what looked like a then more battered Northern Ireland street scene, showed me how universal benefits keep our society from falling into the abyss

I am sure anyone who has seen education in Africa or India feels as strongly about access to free schooling, and so do I.

But here’s the problem, which any physicist will explain. Expand anything quicker than that which is surrounding it, and it sucks in some detritus and has a general lack of efficiency. Sure, it gets the job done for what ever it was measured to do, but it is horribly inefficient at that action.

The result of tripling the whole capacity of the NHS and UK national education system so quickly, is that management grades and bureaucracy costs have multiplied by six fold, ie: double the rate of expansion of the whole system. Wouldn’t you have thought that the system would have got more efficient over less? No: when you pour cash in like water, there was bound to be some air trapped in there somewhere.

Conservative middle ground agenda

So why are the gaining conservative right going about focusing the debate on spend versus efficiency? Primarily because Labour can’t, and secondly because its a vote winning middle class debate. Extending that debate on pensions when you have bodies like the OECD and the S&P predicting the UK debt could move to 200% of GDP by 2040 – the same as it was at the end of World War 2 – also extends that debate to the pensioners, and all the way down to those in their thirties. In other words, its a game winning copper bottomed Conservative win debate

The solution is probably a personal contribution with state backed minimum level delivery as proposed by New Labour in 1997, by then Minister of Welfare Reform at the Department of Social Security, Frank Field. However, after clashing with then then Chancellor Gordon Brown, Field resigned his post 12months later. Field has since been a huge critic of Brown, and was one of the plotters of the Spring 2009 attempted coup. I wish he had won the first battle, as there would be no need for the second – nor the next Government to address the same state problem, but now with greater need

Contract negotiation

Should this be a concern of all UK citizens? Yes – and for those seeking employment, a pension contribution is a soft win employment contract debate. Many employers will accept higher contributions from themselves – or even golden hello pension contributions – if you pose it in the right way. Corporate pensions contributions are wholly written off against tax, so there is no real cost to the company.

So, next time you are in an interview, and afterwards get an offer letter, think pensions. It is an easier win over pay or bonus structure, and in the long term with an ageing population will look after you far more than spending your pay on the stuff which got us into this crisis in the first place: leveraged debt!

Good Luck!

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