He almost – just almost, not quite – gets to grasp why his Finance for the Future ideas about pensions are ridiculous. But of course he manages to fail at that logical hurdle:
This is the fundamental building block on which all pension thinking has to be based. Pensions require what is, in effect, a salary sacrifice, but it is by those younger people who consent to maintain an older generation who are no longer working.
I stress, saving only comes into this peripherally. The whole idea of pension saving is an illusion and a massive diversion. All that savings do is provide the older generation with the potential power to buy the services of the younger generation.
I stress the word ‘potential’. I do so for good reason. That is because to realise their savings the older generation must find a willing buyer for them. That buyer will, inevitably, come from the younger generation. If that younger generation does not think that what the older generation has saved in is of value to them then pension savings provide no guarantee of a future income.
OK. So the older folk have to flog the things they’ve saved up to provide their pension to the younger folk who are now starting to save up for their pension.
Agreed, that is the way it goes.
Which is why the vast majority of the pensions industry is in second hand pieces of paper. It’s the old selling investments to the young. Cashing in their savings that is. Which is why not all – in fact only a tiny fraction – os savings in hte economy results in new investment. Because a very large portion of the capital of the country – what is it, £7 trillion or summat out of £15 trillion in household wealth – is in those pensions which the young should buy off the old, to sell to their own kids in their time.
Pensions are a flow of capital through the economy over generations, not an addition – necessarily – to the capital of the country.
Spud gets so, soooo, close. But if you then said to him that this is why pensions ought to be in secondary bits of paper he’d start waving around his pensions reports insisting that it should be 1% bonds for all, wouldn’t he?
For me this is one of the most joyous things about the ‘Tater. He jut never does connect the varied things he’s saying with each other.
The old have to sell their pensions assets to the young. Yep, they do. Therefore a vast amount of the capital movement in hte economy is going to be the selling of pensions assets down the generations, isn’t it? Which means vast trade in second hand pieces of paper. The very thing the ‘Tater complains about.
Why do they never consider how the young benefit from the contributions of the old? They only ever moan that some of us have got something left for ourselves after working for 50 years and paying a third to a half (and some) to the government in taxes and it’s so unfair.
Who paid for the hospital I was were born in? Where did the money for all the healthcare I received before school? And where did that school come from? How did all these roads and railways get here? Isn’t it amazing – I turn on a tap and water comes out!! This electricity stuff is magic innit! Who leant me the money to pay for Uni – (it may be ‘your’ debt, but it wasn’t ‘your’ money).
Those moaning, who have grown up and been to Uni, have contributed nothing in 20+ years and are nothing more than spoiled entitled brats.
The argument he advances for why pensions are a bad idea (‘pension assets might not be valuable, so why should young people buy them?’) applies just as well to any other savings – or indeed investments, and money itself.
If you replace ‘older generation’ and ‘younger generation’ with ‘people’ and ‘other people’, his argument becomes: any arrangement whereby people have something that they hope other people will want to buy is an artificial ponzi scheme and must be swept away and replaced with something organised by the state.
A 1% bond would be a competitive rate of return compared to the various private pensions I’ve been forced to “invest” in per employment contracts over time.