He said that scrapping the effective compulsion to buy an annuity would inevitably lead to savers “self-administering” the amounts of income that they drew. Such flexibility would “disconnect income from the return generated”, he said. “There is, therefore, the possibility of simply running out of money.”
He said two changes were needed to avoid the problem: making the new freedoms available only to those with pension savings of at least £100,000 and only to those over the age of 75.
He pointed out that Australia had enacted similar reforms 20 years ago and said “the experience there is that those over 80 are fast running out of cash”.
Number of comments: 50
Best comment: “I live in Oz, and have never come across a single case of anyone of pensionable age running out of money.”
‘How laws banning cash could end boom and bust’ – May 16 2015
Author: Jim Leaviss, head of retail fixed interest at M&G Investments
A proposed new law in Denmark could, Mr Leaviss said, be the first step towards an economic revolution that abolished physical currencies and normal bank accounts and gave governments futuristic new tools to fight the cycle of “boom and bust”.
He referred to suggestions that in future everyone could be forced to hold all their money electronically in a government-controlled bank. This would enable the authorities to encourage us to spend more when the economy slowed, or less when it was overheating.
“To boost spending, the bank imposes a negative interest rate on the money in everyone’s account – in effect, a tax on saving,” Mr Leaviss said.
In the opposite situation, when the economy is overheating, the bank will drop any negative interest on credit balances, but could go further and impose a tax on transactions.
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“So whenever you use the money in your account to buy something, you pay a small penalty. That makes people less inclined to spend and more inclined to save, so reducing economic activity,” he said.
“If this sounds rather fanciful, negative interest rates already exist in Denmark and Switzerland.”
“At the moment it’s easy for individuals to avoid seeing their money eroded this way – they can simply hold banknotes under the proverbial mattress. But if notes and coins were abolished and the only way to hold money was through a government-controlled bank, there would be no escape,” he said.
Number of comments: 3,112
Best comment: “Sounds like tyranny to me. Personal property rights are the only thing that make men free.”
‘Forget returns, just improve society’ – July 18 2015
Author: Saker Nusseibeh, chief executive of Hermes Investment Management
“The financial system has failed,” Mr Nusseibeh wrote. “The credit crisis and its consequences – the worsening of living standards for millions of citizens – have proved this beyond dispute.”
He said banks that had taken excessive risks before the crisis in pursuit of unsustainable returns had been bailed out by the taxpayer and that the huge costs of this rescue “will be borne by all of us for at least a generation”.
“Why did the owners of the banks – the asset management industry – not see this coming and demand changes in the banks’ behaviour?”
He also addressed concerns about the environmental sustainability of the current model of investment and economic growth: “Have we sat idly by while a carbon-intensive economy produces an environment in which we soon won’t be able to live?”
He said asset managers, as the agents for the owners of the companies that make up the global economy, “have the power to change their behaviour so that we avoid future financial and environmental catastrophes”.
“But concentrating purely on financial returns means we have ignored the cost to the environment and to society of investment decisions,” Mr Nusseibeh said. “It is, therefore, flawed as a means of allocating capital.”
He said: “Companies owned by our savers’ money ultimately control the architecture of the society these savers live in, and will retire in. Surely part of the investment discourse has to be an empowerment of our savers to have a say in that architecture in the same way they have a say in government policy via the democratic process?
“I would argue that unless we actively manage the impact of a carbon-based economy, we will have used our customers’ savings to create an environmental and financial disaster for them in the future, which will negate any financial return we may make on their behalf.
“Or to put it another way, no saver wants us to increase financial returns by 1pc or 2pc if they end up retiring in Gotham City.”
Best comment: “Fund managers have no moral or legal duty to reshape society; that is the duty of politicians.”
‘We can afford not to retire later’ – November 14 2015
Author: John Macnicol, Visiting Professor in Social Policy at the London School of Economics
The state pension age is rising and many expect it to reach 70 within the foreseeable future. But Prof Macnicol described the arguments for these increases as “somewhat threadbare”.
He said the common sound bite that “people are living longer” was spurious. “Male life expectancy at birth is increasing only by around 0.3pc a year, and female expectancy by 0.2pc. At the age of 65 the annual gains are only 0.9pc and 0.6pc, respectively – hardly catastrophic,” he said.
“It is also the case that official forecasts of the total UK population are constantly being revised upwards, the most recent estimating a population of 74 million by 2039. If this occurs, the proportion of people aged 65 or more will decline from a previously projected 23pc to 21pc, roughly Germany’s current level.”
And he asked: “If the retirement age was increased to 69 tomorrow, exactly how many new jobs would have to be created and where would they come from? The answer could be anything between 1.5 million and 3.5 million new jobs.”
Number of comments: 97
Best comment: “Women joined the workforce and did not displace men; old people will not displace younger people. They also work in different areas: pensioners won’t play professional football, develop apps, serve coffee or work on production lines. They do customer service, and well.”
‘The best way to help the young is to help the old to move’ – September 26 2015
Author: Nigel Wilson, chief executive of Legal & General
“Excessive house price inflation has been unfair to younger people,” Mr Wilson wrote. “Chronic lack of supply has made home ownership unaffordable for the younger generation, but paradoxically the answer is to build more and better housing for older people.”
He said less than 2pc of housing built in Britain in 2014 had been for older people and added: “The chronic lack of suitable properties for the 3.3 million baby boomers who now want to move to a smaller home cuts off the supply further down the housing ladder.”
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He said the “last-time buyers” were a large market: “the over-60s have seven million spare bedrooms, the equivalent of 2.6 million family homes”. “Many of these people are stuck in oversized, inconvenient, energy-inefficient family homes, but suitable properties don’t exist for them to move to.
“The last-time buyer market holds the key to a more effective housing market. More choice is crucial; no one should be forced to move. But better, purpose-built housing is needed for older people.
“We also need better mortgage options for older people, including equity release, and fewer disincentives such as the onerous burden of stamp duty.”
Number of comments: 221
Best comment: “People don’t necessarily want to move – they want the home they have known for years to be adapted to cater for them in later life.”
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