I'm delighted that Peter Hain has announced a new package to restore 90% of what was lost by 140,000 people whose pensions failed when their employers went out of business a few years ago. Both campaigners and the BBC have suggested Hain has had to win a major battle to achieve this outcome - and I dare say that's true. But if I were him tonight I'd feel Gordon Brown owed me, rather than the other way round. While Gordon Brown and Alistair Darling may have been reluctant to give up the £2.9 billion it's said this will cost - a huge sum of course, let's not forget - the reality is that that money has bought them the one favourable headline they've had for weeks. While we all pay for this bail-out, I think very few people will grumble about it: overwhelmingly people feel sympathy for what's happened to these people, which they see as an extremely unfair reward for a lifetime's work. They think of how they'd feel in that position - or if it had happened to their parents - and see the importance of the state's stepping in.
And that is important, and right. This is quite unlike the bailing out of Northern Rock, which was forced on government and regulators to do to shore up the banking system in spite of any concern about moral hazard. In that case, state support arguably protected the bank from the market punishment it might have expected to suffer; arguably it made other institutions more likely, not less, to indulge in similar business methods in future, in expectation a similar safety net would be extended to them. I'm not sure I buy that argument entirely (few banks would want to go through what Northern Rock and its bosses have). But anyway, the pensions decision works the other way round.
A major problem for our economy and society in Britain is that people have lost faith in pensions entirely. The old-fashioned "defined benefits" type of occupational pension has largely disappeared outside the public sector (where pension benefits are also being scaled back by employers and the government which backs them). And the new type of "defined contribution" or money purchase schemes offer much less predictability - what you get all depends on the day you activate your pension. If you were unfortunate enough to retire just after Black Monday or 9/11, your pension would have suffered for it. And then knowing that some people lose even the retirement income they were entitled to expect - all this simply makes many people feel pensions aren't worth it. I have to admit to being a pensions-sceptic myself. In spite of having accrued private and public sector pension rights, I fully expect these to amount to a pittance in 2035, and to have to work until I drop. I'm not alone, either. The facts that thousands agree with me is shown by the rise and rise of "buy to let" investment over the last ten or twelve years, as increasing numbers came to think investment in property was a better savings vehicle than any pension plan. We'll find out, over the next five years, whether they were right. But my point is made regardless of the outcome.
We'd all benefit if sensible, regular saving for retirement were truly rewarded, and if there were less incentive for the better off to invest in other ways. We'd benefit from a saner, more stable housing market; and we'd benefit from a small degree of increased social equality, or at least the absence of one more factor reinforcing and increasing inequality. Peter Hain's move won't in itself rebuild confidence in pension provision, but it is one small, constructive stone.
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