The current crisis in the property market and the recent woeful attempts to stabilise it show once again how far this Labour government has moved our nation away from the importance of savings and aided the decline of the British pensions industry which was the envy of the world a decade or so ago.
The subject of pensions arouses little passion compared to the property world. The young have turned their backs on pensions (though they in the end are going to have to support the ever-ending life expectancy of British people). Single women have also, in the main, ignored the prospect. The main pension planners today are couples beyond the age of thirty and executives looking for the best working deals.
It may be a generalisation to say that the public’s lack of detailed interest has been at the heart of the current state of this country’s pensions industry but it is clear that property is now most people’s major long term investment. As the current property crisis takes a toll, and I fear there is a much greater downside to come, many homeowners face a critical future.
Some parts of the financial services sector have had such high profile problems that savers are now very wary. The mis-selling scandals in the public sector still reverberate. A recent report into the disaster at Equitable Life has done nothing to ease the fears of people who once felt incredibly safe in handing over their money to supposedly secure institutions. The complexity over annuities continues to undermine the public’s belief in pension savings so is it any wonder that property is the only place where people trust to put all their money today.
Now that trust is being damaged by the truth that property prices can go down even when there is a higher demand than supply.
It was some six years ago that I wrote, after talking to many young constituents, that they were guided to buy property as the only safe haven for their long term money. I made the point then that such decision-making must lead to disaster for the country and I used the example of Japan which had suffered similarly throughout the nineties because of its over-investment in residential property.
We are continuing to see company after company tear up their final salary pension commitments for new employees saying it costs too much. By the same token more and more employees have little expectation of a job for life and don’t expect to have a long-term pensionable commitment from their employers. In 30 years time the question must be how this country can support the increasing population of people aged beyond 70 when so few have made proper provision towards their retirement save for the state pension.
As with all financial matters it will be the vulnerable and those with the lowest income levels in society who will suffer most even if the middle-income savers will be the ones most disappointed with the returns they achieve from their lifetime savings.
Today the subjects of savings and pensions are totally off the radar of this failing government and the country will be the worse in the long run because of it.
It is up to us politicians to make sure that the importance of boosting overall levels of savings are back on the agenda. We need to be able to assure our nation that their savings are safe and that no one who has acted responsibility in savings matters is left impoverished by the failure of public trust that surrounds the financial services sector.
The property sector is now taking all this government’s attention yet it is the policies of this government that have done so much to create the artificial bubble which has benefited so many mature home owners, deprived many young people the opportunity to climb on the housing ladder and now left many heavily mortgaged folk in some dread of the future. Whilst the government patches up a short-term rescue package for home-owners, we should not forget the importance of savings and pensions as a means of investing for the future.