24 November 2010

Can retrospective legislation ever be ‘fair’?

Herewith some brief notes on some of the issues which arise in connection with recent terrible proposals concerning pensioners. I could and should be able to write much more about this and to get it published; only lack of financial support prevents me from doing this. People coming to work here on a voluntary basis would to some extent enable us to do more.

In the Daily Mail of 17 November there is an article about how governments etc. are letting down pensioners by providing them with no way of getting an income out of their savings.

The author of this article suggests that pensioners might be allowed to invest in special bonds paying a ‘decent’ rate of interest, but that the investment should be limited to a maximum of £20,000, so that ‘wealthy’ pensioners would not be able to benefit unfairly by getting an income which they did not really ‘need’. As usual, ‘need’ is defined in a way which implies that no one receiving more than about the level of income support can possibly be in ‘need’ of more.

Of course, most people with some capital must have suffered from the credit crunch, as the powers-that-be wanted them to do, since we know that the aim of modern society is to prevent those who have above average ability from acquiring any freedom of action to go with it.

In another article in the same issue of the Mail, about how pensioners can ‘sensibly’ get more income from their savings, investing in ordinary shares is described as ‘dangerous’. However, it is a lot less so if you have realistic information about what you are doing.

Over the years, we have invited many people to come and live near us so that they could do some work for us on a voluntary or paid basis, and also get the benefit of the information which we receive and discuss, which is relevant to investment and other financial matters.

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The Pensions Minister Steve Webb, defending the raising of the age at which state pensions will be payable, especially for women, has argued that everyone was living longer, so it was ‘only fair’ that they should start to receive their pensions at a later age. This, however, presumes on the modern view of pensions as a ‘contract between the generations’. Originally people were supposed to be paying, with their contributions, for the income that they would eventually receive, which would be paid out of the income of a fund to which they had contributed. In such a situation, of course, the fund would go on being there even after any particular person had stopped drawing from it, for the benefit of future pensioners, and it would be constantly amplified by the contributions of those who did not live long enough to draw on it at all.

In fact, this fund never existed; see the book The Great Pensions Swindle previously referred to. Nevertheless, people were paying contributions into a supposed scheme which had undertaken to produce a pension bearing some relationship to the cost of living, or to the average wage, at a certain definite age, and this was something which people took into account in deciding whether to pay contributions into this scheme or not.

If it was wished to change the age at which pensions would be paid out, on old-fashioned principles it would be necessary to start a completely new scheme which only applied to people who started paying contributions after the new scheme had started. Retrospective legislation, or retrospective change in legislation, is unprincipled, but this is an idea that has been lost sight of.

Ros Altmann, the Director General of Saga, the association for over-50s, has criticised the postponement of the pension age, especially for women, not on the grounds that it is (in effect) retrospective legislation, but because the changes are too rapid and do not give those who are approaching retirement age ‘enough time’ to think about how they can arrange their affairs to compensate for the change.

One might think that an association of people over 50 would have old-fashioned enough ideas to stand up for principles, such as the principle against retrospective legislation. However, the majority of those who are over 50 now have spent most of their lives under the auspices of the modern ideology. In order to have been born before the onset of the Welfare State in 1945, a person would need to be over 65.