Tuesday 29 November 2011

Remember that it will all be the same in a hundred years' time

As Europe teeters on the brink of an almost unimaginable economic catastrophe, one that may make the events of the 1930s seem like a perfect summer of cream teas and croquet on the vicarage lawn, my thoughts keep returning to a valuable saying of my mother’s: “It will all be the same in a hundred years’ time.”

Bearing this in mind, one of the many things I cannot get worked up about is pensions. Partly, I will admit, because my personal late breeding programme makes it highly unlikely that I will ever be able to retire. Though the other thing making retirement totally inconceivable is the dreadful performance of the investments that I was persuaded to make over the years in a pension fund.

I remember that this concept was sold to me with various projections based on differing growth rates. But I do not remember ever seeing these include the reality of no growth at all, or at any rate growth so low that it barely covers the fat fees of the towering geniuses managing my fund.

My pension fund: how it was meant to be

The image "My pension fund: how it turned out" has been removed to avoid potential charges (financial, not criminal) from the money-grubbing image copyright police. But imagine the one above with the arrow pointing the other way and you will be pretty much there.

I was financially sophisticated enough to see through the great endowment mortgage scan, even though I was called a fool for insisting on a dull old repayment mortgage when I could have this fantastic product that would not only pay off my debt at the end of its term, but leave me rich as Croesus, relaxing in a hot tub in the Caribbean with a minimum of three bikini-clad babes. It was like choosing a penny farthing when I could have had a top-of-the-range Rolls Royce.

I was even bright enough always to tick the “no thanks” box when persuasively offered Payment Protection Insurance, though this does not stop me receiving repeated automated phone calls from helplines eager to pursue my mis-selling claim.

But a pension I fell for, hook line and sinker. Tax relief on the money going in, and a tax-free environment in which my money would surely grow. What could possibly go wrong?

Well, for a start Gordon Brown (peace be upon him for saving the nation from the euro) came along came along and concluded that we were all having it too good, so reduced those tax breaks. Then piles of onerous and expensive regulations were heaped upon funds to prevent another Robert Maxwell craftily using them to line his own pockets. And to cap it all, the stock market went to hell in a handcart.

Not to worry, though, because my pension fund managers kept coming up with brilliant new wheezes for putting money into bright, shiny new things that offered so much more potential than dull old shares. For all I know, they could have included packages of mortgages on trailer parks in Detroit, dressed up as Triple A bonds. Because I made the critical mistake of getting so bored with the whole thing that I broke my lifelong golden rule of never investing in things I did not understand (which basically restricted me to a portfolio of pubs, breweries, hotels, restaurants and bakers) and saying the grown-up equivalent of “Whatever”.

So now I find myself with untouchable pension savings that were originally supposed to fund a comfortable if not luxurious retirement just two years hence, and would now buy me an annuity best described as pitiful.

Do I feel sympathy with those public sector workers who are going on strike tomorrow because their contributions are going up and their prospective pensions coming down? Of course I do. But I also feel that, to coin a phrase, “we are all in this together” in the face of inconveniently rising life expectancy and lousy investment returns. And the one thing I don’t feel inclined to do, as I contemplate the ruin of my own hopes of retirement, is to pay a penny more in tax to support their hopes of putting their feet up at my expense.

Working until we all drop sadly seems the only answer. Just like it was a hundred years ago before people started living long enough to make the whole idea of a pension industry worth dreaming up in the first place.

Originally published in The Journal, Newcastle upon Tyne.

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