I’m beginning to think we live in a version of Wonderland. Either that, or I simply don’t understand maths. Consider this. The British taxpayer effectively owns the Royal Bank of Scotland, or at least 84% of it. The bank made two announcements this week; firstly, that it had made a loss over the last year of £3.6 billion. Secondly, that on the basis of these less than stunning results, it was going to pay its staff bonuses adding up to £1.3 billion. Work that one out! By the way, had they decided instead of distributing their largesse (and our money) to people already on very large salaries, they had instead paid over the same money as a dividend to every shareholder, then every adult in the country could have had a cheque, by my reckoning, of about £22. Not a great deal, I accept, but there’s a lot of pensioners who wouldn’t have said no.
Meanwhile, in the real world, those self same pensioners are yet again getting a raw deal. It’s now thirty years since the link between the basic state pension and average earnings was broken. The government say they will restore the link, but not yet. The conservatives say they also would like to do so, but propose to pay for it by increasing the retirement age for men, which they say they’ll do in 2016. So it doesn’t look as though anything will happen too soon.
Meanwhile, the annual up-rating of pensions and benefits, which we debated this week, appears at first sight to be good news. After all, the basic state pension is going up by 2.5%. However, it pays to read the small print. Firstly, the current rate of inflation is about 3.5%, so that means even after the increase the pensioner relying on basic pension alone will be worse off. Secondly, the government has said that the increase has been “brought forward” from next year, but the increases in following years will be based on a lower figure. So next year, unless something changes, will be a very poor settlement indeed – but of course, that will be after an election!
But thirdly, and this really is the mean trick, the government have decided that what are known as additional state pension payments, which means the state earnings-related pension and second state pension, are being frozen at last year’s levels. That means up to nine million pensioners, far from seeing an uplift, will actually see their living standards drop in real terms. Compared with up-rating additional pensions in line with basic pensions, pensioners will lose out to the tune of £500 million a year for each and every years of the rest of their retirement.
There are so many things wrong with this. To make pensioners the first losers as the financial belt tightens is plain wrong. To renege on the implied contract pensioners had when entering into SERPS is unfair. And of course, many older people are hit by a double whammy, as the expression goes, because while interest rates being low help people paying mortgages, and bring the inflation index down, pensioners get a lower rate of return on their savings. Add to that unavoidable bills like utilities and council tax, and life is getting a lot harder. That’s why I voted against the pensions up-rating motion this week. Not because I want to delay an increase, but because quite frankly this is an insult to older people.
One particular group of mainly elderly people who have more reason than most to feel aggrieved are the policy holders of Equitable Life. The ombudsman looked into the collapse of their policies and concluded that the regulatory bodies had been massively at fault, and in as damning a report as I can remember, ordered that compensation should be paid for the clear maladministration. Ever since, ministers have used every possible delaying tactic to avoid doing so, and the clear impression has been given that the policy is to allow potential claimants to die off to reduce the liability.
Along with MPs of all parties, I have been pursuing this issue over the years, and very frustrating it’s been too. Every time we think we’re making progress, yet another review or study is put in place to hold things up. But the good news is that we finally seem to be getting near to a resolution. That’s why about fifty or sixty of us crammed ourselves into a room not nearly big enough last week to hear directly from Treasury Minister Liam Byrne and Sir John Chadwick, who is advising on a system of payment.
The good news is that Sir John is nearing the end of his work. Further, the minister told us that he thought it was unlikely that he would be applying a means test to payments, and that where a policyholder had died, he thought it likely that money would be paid into the estate. That’s the good news. Less good was that he couldn’t give any date for a final conclusion, but it was unlikely to be this side of a May election, and that he thought it extremely likely that whatever total sum Sir John recommended, the Treasury were likely to put a cap on payments to reduce the costs.
One further disclosure I think many of us found amazing. After Sir John and Liam Byne had left the meeting, the current Chief Executive of Equitable Life, Chris Wiscarson, took the floor. He revealed that he had repeatedly asked for a meeting with the minister, but had not even received he courtesy of a reply. I find that frankly extraordinary, but not untypical. And the whole business looks anything but fair to me, but that applies to so much that affects pensioners.