Pensions in the UK
Published on
by Naomi Christie 2nd March 2009
Pensions are rarely viewed as a scintillating subject but with massive payouts being argued over it is time to re-evaluate.
The former-chief of the Royal Bank of Scotland (RBS) is set not to enjoy his £693,000 annual pension and he's not alone.
Few of us could expect to have such a wealthy retirement as he was promised.
In fact, retirement for many Europeans also means falling into poverty.
Sir Fred Goodwin receives little public sympathy in the UK as the government plan to strip him of his pension. RBS had losses of £24.1 billion last year. The government had to nationalise the bank and are trying to change the law in order to get Sir Goodwin's pension back.
Some pensions cannot be paid off, not following incompetence, malpractice or scandal, but simply because the money is not there. Pension schemes had not factored in a key issue: people are living longer. There is not enough money in the pensions-pot to pay out to our aging population.
With state pensions at only £90 a week, the situation is dire for those whose pension schemes have failed. To offer some perspective on the situation, cheap rent in London is £100 a week inclusive.
Professor Nick Barr of the LSE speaking at a public lecture in February said: "Pensions feel like they are in crisis. There isn't a crisis, there's a problem and it is solvable."
Professor Barr suggested emulating the pensions model of other countries such as The Netherlands. "Pensionable age should raise in a rational way as life expectancy increases," he added.
The public lecture came on the day that Sir James Crosby resigned as deputy chairman of the Financial Services Authority (FSA). Chief of the FSA, Lord Adair Turner, still made it out to add his views.
He said: "Not only are people living longer, but their health is improving. We have to increase retirement age."
Sir Goodwin is 50-years-old. The government aims to have retirement age at 66 by 2024, just in time for Goodwin to work another year. But no. Goodwin would have been retired for sixteen years, and would have received over 11 million in pension payouts over that time.
Harriet Harman, accusing Sir Goodwin of getting "money for nothing" plans to change the law to get back this money.
Something just does not add up. With leading economists calling for retirement age to increase, how have we found ourselves in the position that a 50-year-old bank boss can retire early, regardless of how much money his business has lost, and then expect to receive a pension of £13,000 a week, when state pension stands at £90?