Pension reform could play and be a major part in the economic recovery from the present recession, and arises from the large amounts of money that would be released into investment infrastructure in the economy.
The proposed new Universal pension scheme would involve 50% of the working population who have made no previous saving in pensions, even restricting this to age 25 to 44 still gives some 8.5 million new savers. At an average total contribution of £1,600 per year this gives annual fund addition of £13.64 billion, which could be doubled by the NI rebate to £27 billion per year.
If all of this were invested in infrastructure, it should not be difficult to meet a 6% return, which would itself be invested and effectively frees any project of Capital return during the construction/ investment stage.
It would be essential for maximum economic impact in the UK that the majority of this money is retained within the UK, i.e. spent here, particularly in the early years. This would have a major economic impact, creating jobs and growth spread over a wide range of skills and ages and would need careful planning.
There are many areas where this spend could occur in a positive beneficial way and which are urgently needed and slowed down by present spending cuts and investment starvation. Affordable Housing, Schools, Hospitals, Care homes, Transport, Energy and various High-tech R&D areas ready for implementation are all good examples.
The majority of these in the early stages are labour intensive and use materials and skills available here such as bricks, mortar, concrete, steel etc. and our manufacturing capability could be built up to meet a good part of the equipment needs of the second phase.
Most of the project have timescales ranging from several up to 10 years, with expenditure spread over this period; over ten years the pension funds available in real terms with interest would amount to some £350 billion plus.
It needs little imagination to visualise what such spend would do both to growth and basic structure of the UK.
- The ill conceived HS2 at £32bn could be replaced by a 1200 mile advanced vacuum network linking all the major cities, which even with rolling stock would leave £12bn+ for major electrification work elsewhere.
- The Severn Barrage at £32bn would create employment from the West Country, Wales up to N.Ireland and solve our green energy needs.
- A Water grid; Broadband highway; Gas grid and major sewer, water and electricity work
- A million affordable homes should cost some £60 billion, 1.000 schools and hospitals could be similar.
- This would still leave some £120bn for other projects and investment in roads, Hi-tech etc.
All in the first ten years, with another ten before the first pensions become due.
There is the opportunity to recapture the spirit and endeavour shown in the 19th and early 20th Century and the social responsibility, which pulled millions out of extreme poverty into a more comfortable existence. We live in an exciting era with technical advances equivalent to those occurring in that time.
W e need to face up to the challenge and grasp the opportunities firmly but this will not occur without major changes to the current social structure and our attitude to change, plus positive vision in approach.
Comment Footnote – It was reported this week that over the past six months, annuity rates have dropped by a third; someone retiring has therefore lost a third of 40 years of hard earned pension savings, effectively “stolen by a forced sale. This money still exists to be realised by its new owner and shows the stupidity, dishonesty, speculative and unacceptable nature of the present pension system. It will be a major problem in Nest, be very much afraid as all will soon be involved in this modern form of highway robbery.
Time for a change is well overdue and requires positive action to guarantee, protect and safeguard the personal pension savings of all in the UK. It is our pension future and the State as well as the individual has as much to gain.
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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