A report by Saga today points out that some of the biggest losers from recent policy moves has been pensioners.
They have suffered from a cut in the real value of their tax free allowance, low yields on savings and lower pensions to name but three problems.
Saga are a 'vested interest group' of course and so you have to be careful. For example they claim Quantitative Easing (QE) has caused inflation and reduced the purchasing power of pensioner incomes. While inflation does reduce the purchasing power of all incomes I know of know evidence that QE has done anything except prevent a deeper recession.
The distribution of income is important however. The Guardian report shows how averages can deceive us into thinking things are not that bad and reminds us that the costs of economic problems is often concentrated on a few groups.
The distribution of income seems to be a macroeconomic policy that is consistently ignored. But in all honesty in a volatile economic world can governments afford to consider whether pensioners have lost out when the country as a whole looks to escape from a double dip recession?
ReplyDeleteFor example quantitative easing has significantly helped the UK avoid a worse and deeper recession; it has increased the money supply and thus consumption, so does it matter whether it has caused small amounts of inflation ? Similarly pension pots have had to be slashed as firms and government look to cut back on expenditure. Of course I'm not suggesting we leave pensioners penniless because in the end we'll have to pay for our elderly, but we should at least for the moment get our priorities straight.
Personally, I think pension schemes are a bad idea, as they don't keep up with inflation. A doctor made me aware of this, as his friend was able to buy a house in Kensington, for roughly £11,000, maybe 50 years ago. That house has an estimated worth of £250,000 pounds now. He then asked me "Would you rather pay a large sum of x now, and reap the benefits later, or keep paying small y, which may add up to x later, but by then x means far less than before?". What do you think?
ReplyDeleteHowever, most people do invest in these schemes, and I think (and this is a matter of debate) the government needs to take care of the vulnerable, as this is a more humane way of looking at the problem.