10 Jul 2010, 9:47am
personal finance:
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  • ConDems to Final Salary Pensioners: All Your Base Are Belong To Us

    In a remarkable piece of retrospective legislation the ConDems not only trashed public sector workers pensions by between 10-25% but they also want to do that to me, and I’ve never worked in the public sector! How? by switching pension indexation from RPI to CPI. A couple of the things RPI contains that CPI doesn’t are fuel and council tax, it’s good to know that these are things I won’t be needing as a pensioner, I guess I can burn the furniture to keep warm and lob burning logs at the Council Tax bailiffs to keep them at bay…

    In some ways this would be acceptable if the pension scheme itself proposed this change, in the end there are issues with funding and you have to be pragmatic, 90% of something is better than 100% of sod all. I’m not chuffed at the idea of working another year to save enough to compensate, but in the end we have been living beyond out means in the west for ages so some of this may have to happen. Inflation is likely to rise in future for some of the reasons outlined here: a burgeoning Asian middle class, food price inflation, peak oil and pretty much peak everything if human numbers continue to grow exponentially.

    What I really don’t like, however, is the concept of retrospective legislation, ie things that were contractually defined in the past (my pension booklet says benefits linked to RPI subject to a cap) can get undefined, just like that. It makes you question the rule of law in this country. I am of the opinion, backed up by Land Registry records that I own the land my house stands on, but is the Government going to change the rules and appropriate that, along with other items of what I currently believe are my private property.

    We need a stable framework to plan our lives, and while laws can be changed going forwards, so that things that were once legal may no longer be so, retrospective legislation sucks, big-time. Particularly in the areas of property – changing what you contractually have so you no longer have it is expropriation. In civilised mature democracies, that is normally only resorted to in times of war.

    Perhaps the doomsters are right, and we are travelling towards a situation where you have to hide gold and silver coins into the ground to preserve wealth. The FT sums it up nicely

    A hoard of Roman coins found in Frome, Somerset, the second largest found in Britain, is set to shed new light on a previous era of economic crisis and precarious coalition government.

    The hoard of 52,500 coins, weighing 160kg, dates back to the third century and the rule of Britain’s “lost emperor”, Carausius.

    For what it’s worth, expropriation of property isn’t unknown in times of financial stress. Roosevelt nationalised the privately held part of the US gold stock in the New Deal era.

    Yes, I’m wondering if this will prove to be the equivalent of Gordon Brown’s raid on the dividend tax credit in 1999 or whenever it was.

    You can just imagine the newspapers in X years time saying “if the rules hadn’t been changed, you’d now be getting this much more from your pension”.

    Perhaps they think they’re going to constrain the housing costs that have traditionally seen the two different measures diverge? (Ha ha).

    That’s be nice, wouldn’t it 🙂 While they’re at it they can maybe keep those billion bicycles in Beijing so fuel costs don’t rise as we compete with the extra cars…

    You’re right, AYB isn’t quite my demographic, but it fits the balance of power

    […] Presumably this paves the pay for some savings certificates linked to the CPI not the RPI, which as we all know is a true reflection of inflation as real people don’t use fuel or pay housing costs, […]

     

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