The Guardian, Saturday 6 August 2016
“Labour’s defeat in many respects was due to older voters staying and indeed turning to the Conservatives. The Conservatives gained twice as many votes amongst this group as Labour. What’s more there will be relatively more older voters in 2020 than in 2015.”
Is it any coincidence that people who were aged 55 or over from April 6, 2015 and have been allowed since then to use their pension pot how they wish, without having to buy an annuity, turned away from Labour in May 2015?
Osborne bribed them with their own money.
I recently saw an example of someone who at the age of 60 in 2003 started receiving a very decent occupational pension. Someone who now wants to cash in that pension. He may be able to do so from April 2016.
Osborne hit on a winner with his pension policy. Not only in terms of older voters, but because in not taking out an annuity, they have contributed to a mini economic boom and a feel good factor amongst older voters. £1.4 billion of annuities were not taken out in the first quarter of this financial year. Sales of cars and holidays rose in that period.
Last week, when the BBC covered the economic growth figures, they cut away to a company making replacement windows. Their business is booming. The construction industry may be flat lining, but not home improvements, it seems.
New cars, holidays and home improvements are the sorts of spending people tend to make when they receive a windfall or a redundancy payment. In fact, any sum of money that is the most that they have ever had or are ever likely to have in their lives that they may spend on whatever they like. We now have over 55s deciding a lump sum now, courtesy of Mr Osborne, is better than an income stream until they die. Instant gratification as opposed to deferred gratification. Understandable, if you are pessimistic about your likely life expectancy.
And a splurge of the proportions of that being caused by the annuity cash outs is very likely to cause inflation. Inflation that might well contribute to an rise in interest rates. A rise which, on balance, will be good for the over 55s, but not for younger people. Admittedly a rise in interest rates does offer a double edged sword for the government amongst over 55s with savings and pensions likely to rise, but with negative impacts on house prices. Of course, the latter only matters is you are looking to sell or in some way extract the equity from your property.
And another little twist. When people buy annuities they tend in part to buy government securities. They lend the Government money for a steady, boring rate of return. However, if fewer people are in the market to buy securities then Osborne’s plans to reduce Government borrowing and run a surplus throughout the economic cycle will not be as disruptive economically as one might have at first thought.
Think about that £1.4 billion for a moment. Most pension pots are between £10,000 and £30,000 per person. Let us say that the average is £20,000. £1.4 billion divided by £20,000 equals 70,000 votes, sorry, people. And that 70,000 is only the people knowing they were going to get a pay out in the first three months of the 2015/16 financial year. How much more of that pension money is going to find its way into the economy over the next few years or so?
Of course, people live, on average, longer than they expect to do. The live fast, die young and leave a good looking corpse philosophy may run slap bang into the reality of being over 55, living long, dying old and on a low income in the United Kingdom in the early 21st Century. Are those who have or are planning to not purchase an annuity assuming, if matters go awry in the future, that they may fall back on taxpayer funded support?
In theory those currently in receipt of financial support like Pension Credit should notify the Department for Work and Pensions of any change in their financial circumstances. I mean they should, but … You may, dear reader, have noticed that politicians rarely speak of social security fraud and pensioners in the same speech let alone the same sentence or paragraph! Incidentally, one in three of those eligible to receive Pension Credit are still not claiming it.
Those cashing out their annuities now may be in for a rude awakening in the decades to come, but by then Prime Minister Osborne will have retired to spend more time with his trust fund, perforated septum and ladies of negotiable affection.
Osborne discovered his Keynsian side at just the right moment and managed to deliver a boost to the UK economy without increasing Government spending. Osbornomics is, for the moment at least, more attractive to an over 55 voter than Corbynomics.
The question that annuity cash outs pose for the Labour Party is simple. Had Labour already lost the 2020 General Election before the results of the 2015 General Election were known?
Ever Wondered What People Mean by the Demographic Time Bomb?
During the latter part of my Civil Service career, I used to provide briefings for visits up to Ministerial level. We included in those briefings a couple of standard paragraphs about the impact of the demographic time bomb on the Birmingham and Solihull labour market.
After the Crash of 2008, my then boss, who signed off on the briefings, queried whether or not we should keep the two paragraphs in the living document. I, tactfully, observed that whatever else had happened people had not started getting younger. We kept the two paragraphs in the brief.
A few months later, we both visited this centre (a project for which I had a big hand in getting the funding). A senior nursing officer, who met with us at the Hub, remarked that due to its ageing workforce the NHS would, in the coming years, need to recruit 50% of all school leavers just to maintain its existing staffing levels.
Next time you are out and about or at work, take a look around at the people you see and consider their ages …