The Prime Minister has been accused of using figures ‘designed to mislead’ Parliament on 15 March when he told MPs "it is a £15 billion bill, and I honestly cannot commit the Government, or any Government, to that". He was explaining why the Government was rejecting the findings of the Parliamentary Ombudsman that Government should compensate 125,000 people who had lost much of their company pension when their employer went bust and their pension scheme was wound up. The Ombudsman said these people had been misled by Government leaflets and statements which implied or stated that salary related company schemes were safe (see Money News May 2006). But with an eye-watering bill of £15 billion to accept her report, many people could see why the Government rejected it. But was that figure right?
The next day the Secretary of State for Work and Pensions, John Hutton, confirmed that the cost would be "in the range of £13 billion and £17 billion" and promised to explain how this huge cost had been calculated when the detailed response was published. Three months later he has revealed the sums. And the true cost, in today’s money, is much less – around £3.3 billion and that is spread over 60 years. The maximum cost in any one year is less than £100 million – around one five thousandth of the annual amount the Government spends - 0.02%. It is the same as someone earning £25,000 spending an extra fiver a year. And that is in the peak year in 20 years time. In every other year it is even less than that. Dr Ros Altmann, former pensions adviser to Downing Street and now campaigning for the people who lost their pensions, told Saga Magazine "the £15bn figure in Tony Blair's statement was designed to mislead MPs into believing that the cost is far higher than it really is to frighten them away from pressuring the government into doing it."
The Government reached its staggering £15 billion figure by adding inflation onto the cost. So instead of working everything out in today’s money it added up the cash amounts stretching away into the distant future. So, for example, it inflated the cost in 2039 from the actual amount of £50 million in today’s terms to a cash cost of £375 million after 33 years of inflation. No-one, but no-one, accounts for future costs in this way.
The £15 billion figure did its job, making the public think that accepting the Ombudsman’s report would put an unfair burden on taxpayers for two generations. When the truth is that the cost would be an insignificant addition each year to Government spending.
In a surprise move – did someone shout ‘sop’? – the Government did announce that it would boost the Financial Assistance Scheme which helps some of those who lost money. Instead of helping only 15,000 due to reach their scheme’s pension age by 14 May 2007 it will now give some help to another 30,000 who reach pension age by 14 May 2019. The will be paid a proportion of what they were expecting on a sliding scale from 80% for the oldest down to 50% for the youngest. On the Government’s latest figures that still leaves 80,000 people suffering losses that will not be made up.
The Government may yet be forced to pay out more to everyone. In June campaigners formally asked the courts to review the decision to reject the Ombudsman’s report as one which no reasonable minister could have made.
Saga Magazine would like to hear about your experiences with a pension scheme that has been wound up. What caused it? How much did you lose? Will the Financial Assistance Scheme help you? What do you think the Government should do?
Millionaire’s flow
| The million pound house is spreading across Britain. 337 out of 397 local areas have seen at least one million pounder sold in the last ten years. Halifax, which did the research from official house sale statistics, now estimates there are 66,600 homes in Britain that are worth £1 million or more. Two London boroughs account for a third of all million pound plus sales but Harrogate, Warwick, Macclesfield, Midlothian and Carrick all had 25 or more homes sold at a million pounds or more since 1995. Those two richest boroughs are City of Westminster and Kensington & Chelsea. And they also lead the newer table of £2 million properties with more than 2000 sales between them over the last five years. Meanwhile, with the average price of a home now around nine times the average wage, young people find it harder and harder to get on that ladder which now leads to millionaire’s row. |
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Hip Hip – no hooray! - see September magazine for an
update on this story
If you want to sell your house in the next year get your skates on. Any
house which is put on the market after 1 June 2007 will need to be accompanied
by a Home Information Pack (HIP). Any property already on sale on that date will
have to have a HIP by 1 November if it is still waiting for a buyer. The
compulsory packs will cost around £800. They will include the details of the
legal title to the property, enquiries and searches from the local authority and
a new Home Condition Report done by a qualified home inspector. The 30 page
report will not include information about subsidence, flood risk, radon gas,
contaminated land, or problems with access rights – unless the inspector notices
a problem and mentions it. So buyers and their lenders will certainly want to
make their own enquiries in these areas. And as the report will not say what the
property is worth lenders will want to commission a separate valuation survey –
paid for by the buyer. In Denmark where HIPs have been around for ten years, 80%
of homes still have a separate survey by lenders. The report will include a new
Energy Performance Certificate which will grade the house from A to G – a bit
like a fridge or new car is now – and recommend further energy saving measures.
These documents will have to be no more than three months old when the house
goes on the market. But once it is on the market they will in theory last for as
long as it is for sale, even though local authority searches cannot be relied on
for more than six months. Buyers’ solicitors may not accept searches done by the
seller – and certainly will not if they are more than a few months old – and
that may lead to more duplication. If the home is taken off the market for 28
days or more most of the information will have to be updated. Time taken while
it is under offer will not count towards that 28 days. The pack is supposed to
speed up sales; it will certainly add to the cost of selling. And may not reduce
the cost of buying. More information at
www.homeinformationpacks.gov.uk
Profit from the 20th century
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If you still find it hard to think of the 20th century as the past, even more the antique past, think again. Furniture from the second half of the 1900s, that you might at one time have dumped in a skip, is now collected – and can be valuable. Although G-Plan and Ercol furniture doesn’t quite reach the prices needed for auction houses it is collected, says Christie’s head of modern design, Simon Andrews. "It’s practical and useful and easy to live with but it is in the £50 to £200 range. British furniture by Heal’s or Oscar Woolens or even Liberty would have an interest in the market today." His tips for what is worth real money is "there can be interest in anything that reflects its moment in time If it was made in 1965 it must look like 1965 not Victorian. Secondly the creative use of materials, again of the time. Condition is very important. And it must represent the design skills and ethos of the time." He likes material from the 60s in London "at the forefront of the pop culture" and going back a bit further anything "used in the Festival of Britain on London’s South Bank or the |Britain Can Make it exhibition at the Victoria & Albert Museum in 1946 would be interesting." So with prices modest, now is the time to hold, but not skip, those contemporary pieces from the 50s and 60s. And if it reflects ‘its moment in time’ take it to a reputable auctioneer for a valuation.
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August 2006
