The Pension Scandal

Dr Vernon Coleman

There is a rumour going around that Governments in the UK and the EU have spent their pension funds and so pensioners will have to go without.

This is, I’m afraid, a rather naïve rumour. There never were any Government pension funds.

The money paid in taxes, national insurance and so on was never put away in a pension fund. It was spent on roads, hospitals, police, bombs and perks for politicians. All government based pension funds are Ponzi schemes. Today’s pensions are paid out of taxes paid by today’s taxpayers. Tomorrow’s pensions will be paid out of taxes paid by tomorrow’s taxpayers.

Pension funds cannot run out because they never existed.

The rumour that is going around is designed to terrify people and to encourage them to feel more warmly towards the idea of a Great Reset.

The extract below is taken from my book `Stuffed!’ which was written in 2012 but which I believe is still valid.

`The Government can no longer afford to pay the pensions it has promised to public sector workers. Nor can the Government afford to pay the State pension. And, just to make things worse, Government and EU policies have destroyed the attractiveness of private pensions. In a generation's time our streets will be packed with geriatric English beggars pleading to be given enough money to buy a little food.

A pension is (or should be) a fairly simple thing to understand. In his or her prime years, a man or woman regularly puts aside some money so that when they are old, and either want to stop working or can no longer work, they will have money with which to pay heating bills, buy food and enjoy a few little luxuries. The money that is saved is put somewhere safe where it can grow quietly and consistently. You can't get any simpler than that. But governments and finance companies have made pensions unbearably complicated and, in financial terms, extremely unreliable. The main problem, of course, is that our governments have for years run a Ponzi scheme for pensioners. The money you pay in taxes and National Insurance (and which many people still think is being put safely on one side for their retirement years) is being used to pay today's generation of pensioners. Pensions for tomorrow's generation of pensioners will be paid by tomorrow's generation of workers. That is a Ponzi scheme. It's crooked, dishonest and downright illegal. The same sort of scheme is run for public sector workers. Their pensions will be paid by tomorrow's taxpayers. And the same is true for councils too. Tomorrow's council tax payers will pay the pensions for today's council workers. These too are Ponzi schemes and none of them is sustainable.

Although their Government may rely on Ponzi schemes to pay pensions, a number of Englishmen and women have saved for their older years in the proper, more traditional way. In fact, in no country in the world have citizens saved more money for their pensions. (We mustn't get too excited about this. The average English citizen with a private pension has saved around 90% of their annual salary. That is the pension pot from which an annuity must be taken. So, a man with a £20,000 salary may have £18,000 saved and will probably be lucky to receive a pension of £1,000 a year. Still it's something.) In contrast, the people of the other EU countries have saved next to nothing.

Politicians, with vast, taxpayer-funded pensions, don't understand that for many people the State pension will be all that stands between them and penury. Those who struggle to cope on the meagre state pension (one of the meanest in the world) and who have difficulty finding any money for luxuries such as food after paying local taxes, the BBC television licence fee and heating bills will in the future find that they have even less money to spend.

One in six people already relies totally on the State pension. The number so doing is rising rapidly. And the value of the State pension is falling rapidly too. There will come a time (not far away) when almost all of those struggling to live on the State pension will slowly starve or freeze to death.

Two decades ago we, as a nation, saved around 12% of our disposable income. Today, that figure has pretty well halved. High inflation and low interest rates have made saving singularly unattractive.

Public sector workers who feel smug when they look around and see the way that successive governments have destroyed private pensions should know that their pensions are not as safe as they think they are. I have for several years been predicting that the Government will one day be unable to honour its pension obligations to public sector workers – and that day is getting closer. Those who believe that this cannot possibly ever happen should know that at the end of December 2011, almost 300,000 retired employees of SNCF, the French rail company, discovered that they had only been paid a third of their normal pension (the French Government normally pays pensions quarterly in advance).

It is safe to assume that if you work for the Government (central or local) and are under the age of 50 your employer will not be able to pay you a pension at all. Public sector workers will not receive the pensions they are expecting. Let me put that another way: if you work for the Government or a quango (the same thing really), or a local council, then your chances of receiving the pension you were promised are directly related to your age. If you are over 50 then you have a good chance of getting your pension. If you are under 30 you have approximately no chance of receiving the pension you were promised and are expecting. Council workers may think that they have an enforceable contract with their employers. They may think that their union will look after them. Wrong. I suspect that councils will merely file for bankruptcy.

Central and local government officials in England are notoriously shy about revealing the figures relating to their pension debts but in America these figures are available. And those figures are scary.

The pension benefits that have been already promised to folk who work for the Government in Ohio will cost the State more than 50% of its future total tax revenues. Much the same is true of government employees in Colorado, Rhode Island and many other American states where pension benefits are projected to use up between a third and a half of total State tax revenues. Countless employees simply won't receive the pensions they thought they were entitled to. And exactly the same is true for England. The doctors and teachers and whoever else who voted to go on strike to defend indefensible pension rights might like to think about this. Their pensions aren’t as safe as they think they are.

If public sector workers cannot rely on their occupational pensions what about the old aged pension? Surely they can rely on that?

Well, er, sadly, no.

As I have already pointed out, the Government has been running a pension Ponzi scheme and sooner or later it is going to explode in exactly the way that all such schemes explode. Tax revenues are going to have to rise and expenditure is going to have be cut drastically just to keep the nation afloat financially. The chances of today's 30-year-olds receiving a State pension are approximately the same as the chances of England winning the World Cup ten times in a row. We all expect to receive our pension because we have been led to believe that it will be there, patiently waiting for us, when we retire. But there is no legal liability. The money isn't there. And if the Government cannot afford to pay out pensions then there won't be any pensions and there won't be a thing anyone can do about it. There is no contractual liability. Just hope and naive expectation.

In 2012, the Chancellor of the Exchequer claimed that pensioners could no longer expect young people to pay for the costs of their old age. He said that this was an intolerable burden on the young.

Quite right.

But that’s what has been happening since pensions were first introduced.

And there is no sign of things changing.

The age at which people can retire is going to rise, rise and rise again. Those who are now in their 40s will probably not receive any sort of pension until they are at least 70-years-old and the current generation of young people will have to work until they are in their 80s.

My conclusion is that the Government cannot afford to satisfy any of its pension obligations. Many public sector pensions will not be paid out. The State pension will have to be subject to dramatic cuts. And the age at which it is paid will have to rise dramatically. The nation will go bankrupt if we continue to try to pay out State pensions as we do at the moment. Part of the problem is caused by the fact that our population is ageing rapidly. There are, today, more people over 65 than under 16 and the demographic situation is rapidly deteriorating. Within a decade this population time bomb (which I first described in my book The Health Scandal in 1988) will explode.

(The above was taken from the book `Stuffed!’ by Vernon Coleman. `Stuffed!’ explains why we are doomed to generations of penury, depression and social strife. The book explains who is to blame and why the only solution to our woes is a revolution. `Stuffed!’ was first published in 2012. It is available on Amazon as a paperback and an eBook.’)

Copyright Vernon Coleman October 2021