Pensions – How To Be Topp

by | Aug 11, 2014

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The New State Pension? Steve Bee, founder of Jargon Free Benefits,  Says You Don’t Need to Be the Skool Swot – Just Capable of Thinking Ahead. As Any Fule Kno.


Every now and then, you’ll hear people say that we need to teach our children about finance while they’re at school. A financially literate populace is seen by and large to be a good thing – but financial education is far more than giving people a detailed knowledge of the inner workings of the tax and savings systems.

And, anyway, most financial issues are not that difficult to get the hang of. Cue Charles Dickens’s David Copperfield and the (presumably by now) immortal words of Mr Micawber: "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." That would probably cover most of what people need to know about holding folding.

Pensions Are Supposed To Be Simple

But the subject I’m caught up with, pensions, isn’t like ‘most’ financial issues. The detailed complexities of our pension system are mind-numbingly bamboozling and well beyond what ordinary human brains were built to cope with. But pensions really shouldn’t be like that; they should be no harder to understand than any other financial product like an ISA, say, or a piggy bank.

Pensions at a basic level are pretty straightforward really. We’re born, we get educated, we go to work, we stop work and then we die. (I don’t want to spoil it for anyone, but that’s the way it pans out.) The bit between leaving work and leaving the planet is what we refer to as ‘retirement’. A pension is used to provide ready money for people in that position.

The alternative to putting money aside for the future while it’s rolling in while we’re employed is to cut out the last bit in the previous sequence of events and go straight from the starting work bit to the leaving the planet bit without having the retirement interlude in between. That might appeal to some people who really get a kick from being at work or who are lucky enough to have a job that isn’t too stressful or difficult, but it’s not for everyone.

 No Lamborghinis, And No Desperation

The government (a.k.a. the rest of us) will soon provide a basic subsistence level pension that will keep the wolf from the door, but won’t stretch to foreign holidays, sports cars and all the sort of stuff older people are supposed to be into. That’s the way it should be I suppose; we don’t want to see older people begging in the streets, but we don’t want to see them running around in Lamborghinis we’ve paid for either.

The 19th century idea of the poorhouse was not a good one. The 20th century idea of a subsistence level state pension that people can use as a reliable foundation upon which to build their own later-life savings is much better. That idea that Beveridge first postulated during the Second Wold War is now at last about to become a reality in the second decade of the 21st century; we’re going to have a subsistence-level state pension for all new retirees from 2016.

Older people will hopefully no longer face the ignominy of receiving means-tested support and will have a solid foundation that will ensure their own savings are not devalued through the withdrawal of benefit.

That’s great. Now all we need to do is tell everyone about it while they’re young enough to usefully build on that foundation.

That’s where education comes in.

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