Demography and other impostors

I like to think of myself as a family man. I like to spend time with my kids. I try hard to listen to what they have to tell me about their lives, despite having a personal tendency to talk rather than listen. I like my kids; they are nice people. And they are growing up quickly. Despite a two-year age gap between them, they are both on the cusp between being children and being adolescents. I suspect that too many of us adults have forgotten what a difficult time adolescence can be, and end up being quite unsympathetic to this natural transition from childhood towards adulthood, which is the root cause of what was once renowned as "the generation gap".

Much as I love to spend time with my children, I also enjoy the quiet time at home when they are in school. This routine will be shattered on Thursday this week, when both of my kids will be at home. This is because teachers at both of their schools will be on strike, hence the schools will be closed on "health and safety" grounds. At first I was irritated by this break into my sacred time alone, but then I considered the issue much more closely, and understood that this strike has been called because of what can only described as an attack on the pension rights of the teachers. I use the term "attack" not as hyperbole, but because that is what is the government's policy truly is.

A pension is a long-term contract between employee and employer, by which a portion of the employee's wages are deferred in order to provide an income after retirement. The deferred wages (int he form of so-called employee and employer contributions) are placed into a pension fund, which invests the monies in the various financial (and other) markets, hopefully generating returns which will provide a decent level of retirement income (pension). Any changes to a contract must surely be negotiated to an agreed conclusion by both parties; anything else must surely constitute a breach of contract. And, although there may be a logical rationale behind the government's decision to change pensions (raise the retirement age, increase the level of contributions, move from defined benefit to defined contributions), to do so unilaterally seems to me to be both legally questionable and ethically wrong.

My interest in pensions began back in the late 1970s. Between doing my Master's degree and my PhD I spent time as a filing clerk for Sotheby's London office. At that time a number of pension funds were engaged in the purchase of fine art. Despite having little but a layman's knowledge of pensions or pension funds at that time I was bemused by this strategy. One consequence of this was finding myself undertaking a PhD thesis on the investment behaviour of UK pension funds. Back in 1980 I recall vividly reading the report produced by the committee chaired by former Prime Minister, Harold Wilson, on the functioning of the financial system. It was then that my attentions were drawn to what has since become known as the "demographic time bomb", whereby society is ageing. We have seen increasing numbers of pensioners and reduced numbers of people of working age. This is one of the rationales underlying the current government's position on pensions. However, more than thirty years have elapsed since I first learned of this demographic time bomb.

Some would argue that it is unfair to the current (coalition) government to blame them for the current attack on pensions, when so many governments have previously failed to grasp the mettle. However, it is not the issue of pensions reform which I am criticising; rather it is the way in which this has been approached in a dictatorial fashion by the government. In a democracy the government is elected to represent the people, including teachers. When democratic government tries to dictate to the people it is in breach of its mandate, and cannot be surprised when people react strongly in opposition. If the government believes its actions to be correct and appropriate it needs to make the case and convince those who will be affected. There needs to be an attempt at consensus. There has been no such attempt. Thus, although I agree that pension reform is increasingly crucial and that the current system is rapidly approaching a tipping point, I remain firmly in the camp of the striking teachers. I shall look forward to spending Thursday with my offspring, and hope that the strike forces the government to rethink how best to go about reforming pensions, not how to impose it on others.