The Not So Merry Go Round Of Pensions Reform

Whenever the word “pension” appears in the press, there is a new scandal attached to it. The latest outrage came in the form of a 24-hour, public sector strike. Around half (12,000) of all state schools were closed, marches took place around the country and 15,000 protestors gathered for a rally in central London.

This latest outrage, over the government’s cuts in public sector spending (affecting public sector pensions and jobs), is simply yet another symptom which proves that traditional pensions are unsustainable. In a nutshell, many governments promised something which they now can’t deliver, as pension liabilities have skyrocketed with the changes in demographics.

The strike (on Thursday 30^th June 2011) was prompted by fear. Fear because we have been led to believe that traditional pensions are the only option in retirement. This is simply not true! It IS possible to take control of your own financial freedom in retirement, but not through the traditional routes. The best way to build a secure and inflation-proofed pension is through property.

If you are ready to take that step today, then call us on +44(0)1273 447 300 for a no obligation chat. If you still need some convincing, then read on for the full story.

Strike! Strike! Strike!

The strike was headed by the Public and Commercial Services Union (PCS) and joined by the National Union of Teachers (NUT), the Association of Teachers and Lecturers (ATL) and the University and College Union (UCU).

As well as teachers, the walkouts included PCS workers in:

• Air traffic control
• Benefits and welfare services
• Border and immigration
• Coastguards
• Courts services
• Customs
• Defence maintenance and support
• Information technology
• Police support
• Security and  …
• Yes, you guessed it – state pensions and taxation!

“The burden of deficit reduction”

The government believes one in five of the nation’s 500,000 civil servants went on strike over the planned changes to their pensions. They complained they would be required to work longer hours and pay more towards their pensions, only to receive less in retirement.

PCS general secretary, Mark Serwotka, says: “Everything we worked for is under attack. Thousands of jobs are at stake, lower pensions are set to cost three times as much and pay is frozen while inflation soars.”

TUC general secretary, Brendan Barber, adds: “The burden of deficit reduction is being piled unfairly onto millions of low and medium paid public sector workers who did nothing to cause the crash. Their pay has been frozen for two years, even though inflation is higher than it has been for a decade.”

The reality - a problem which won’t go away

However, ministers are standing by their decisions and speaking out against the strikes. Lord Hutton explains the public sector reform is necessary and strikes will not “make this problem go away.”

So what exactly is the problem?

1. Government pensions do not come from a fund. Rather, they are paid for with existing taxpayers’ money.
2. We have an aging population, with less younger people working and paying the taxes required to pay the pension costs.
3. We are living longer, which means pension payments need to stretch over an increased number of years.
4. There is simply not enough money to go round!

Facing reality

Inevitably, we are going to have to work for longer, pay more towards contributions and (probably) receive less when we retire. The only uncertainties are how soon this will happen and how much we are going to lose.

Even Ed Miliband, whose salary is essentially paid for by the unions, said he disagreed with the strikes, commenting: “I know that teachers and other public servants are worried about their pensions. I understand their anger about the way the government has acted. But this does not alter my view that today’s strikes are a mistake. It’s a mistake to resort to disruption at a time when negotiations are still going on. The central argument is that while we need to reform our pensions system, it must be done in a way that is fair.”

Not fair!

So, what is a “fair” way to reform the pensions system? What’s fair to one may well be most unfair to another! Let’s take the strikes. Is it fair that working mothers had to take the day off work (and lose a day’s pay) in order to look after their children because teachers went on strike?

Millions of private sector employees have already suffered due to appalling returns from pension fund investments. They have taken pay cuts and lost their final-salary pension schemes. Are they going to have much sympathy for public sector staff who enjoy better pensions and an earlier retirement age anyway?

Is any of it fair? I think not!

What would Warren say?

It is time to wake up to the harsh reality and to look at our options.

Warren Buffet, legendary investor, philanthropist and third wealthiest person in the world (in 2011), tells us: “Chains of habit are too light to be felt until they are too heavy to be broken.”

Well, the habit chains of traditional pensions are now so heavy we MUST break them. It is time to take control of our own financial futures and break the habit of throwing good money after bad in traditional pension schemes.

Feel the fear and do it anyway

Yes, it is a big step to move away from what we are taught to believe in and to try something new. Yes, change is scary, but it is far scarier to face a retirement of poverty. You can take up the reigns of your own financial future and steer it away from the edge of the cliff before it is too late. You can do that through property!

Read The Growing Pensions Scandal and How To Protect Your Future! for some stark facts and figures and a workable strategy which WILL “make this problem go away.”

Call us on +44(0)1273 447 300 for a no obligation chat about how to use property investment to build your pension.

Live with Abundance

Rod Thomas FCA

Posted in Finance & Money

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