Paying The Price

If you have steadily put money aside for your future in something like a pension, ISA or savings account, have had a relatively secure job over the last 10 years and are due to retire in the next 5 to 10 years, then you are probably bearing the brunt of the financial mess the country is in.

With interest rates at 0.5% and the stock market behaving like a lead-weighted yo yo, prudent savers have been amongst the worst hit by the financial fiasco. It is also likely that the same people will be the major port of call for solving the long term borrowing problems that the Government has bought for the future.

The Pension Pain

If, like me, you have seen your potential earnings in retirement trashed inside of 18 months, it is pretty disheartening to watch the massive monies being spent which we will have to pay back in the future. It can only mean one thing - higher taxes which will probably mean that we will have to work longer in order to save enough money to retire while the burden in retirement will be higher.

The reward for sensible financial controls and diligence by individuals is to have a shorter and less comfortable retirement.

The problem is very serious and there is no longer any real solution to it. The stock market may recover over the next 5 to 10 years but that will for many just get their pension pots back to some kind of parity to the value just ahead of the Crunch. How galling then to see Fred Goodwin lose billions and walk away with a highly lucrative and secure pension from the age of 50 for the rest of his life. But then again, how galling to see rafts of Civil Servants and Politicians get the same benefit but paid for entirely out of your pocket in current tax payments.

Making Pensions Pay

The serious outcome to all of this is that there is a greater potential for people to retire and move abroad to where tax regimes are kinder. Cyprus is currently a country that offer a superb climate, is very anglophile, and has a tax rate of just 20% on pensions. Properties are still reasonable value, the infrastructure and law mimic the UK, English is widely spoken and you are never far from a beach. For the homesick, there are branches of Debenhams to get the essentials like HP Sauce.

I am sure there are many other places, hopefully, that will keep such status despite the onslaught of the EU and 'harmonisation' which is not the process in which Harriet becomes first PM and then President of the United States of Europe - what a terrible nightmare that would be.

But certainly, this is a very real problem for the future and threatens to be another blow to the Government's plan on paying back its borrowing. If less people in retirement stay in the UK, then again tax revenues will fall - particularly if they take their estates beyond the borders of the UK and out of range of Inheritance Tax.

This Government has systematically ignored the growing problems of providing an income in retirement unless you are a Civil Servant or Politician where the fabulous pensions are paid for in current taxes - a nice 'Ponzi Scheme' for those in it. With better than 1 in 4 jobs now in the Public Service, more of our tax will be paying for these pensions as time goes on while we get nothing in return from the Government.

Personally, I think guaranteed, end salary schemes for Civil Servants and Politicians should be stopped immediately and make them carry the same burden as the rest of us and stop us paying for lazy bureaucrats' retirements funds.

Next up - Public Servant Expenses Accounts.