In his blog, and in an earlier report, Richard Murphy makes a blistering attack on the private pensions industry. Private pensions currently receive £38 billion a year in tax reliefs and subsidies – an amount so large that it pretty much pays for private pensions. The private pensions industry does what it does at a staggeringly high cost, and it has lost a substantial bite out of money it was supposed to be safeguarding. Murphy asks:
- Why are we investing pensions in this way when there are clearly better options?
- Why are we structuring pensions this way when it clearly allows the extraction of excessive fees for poor return from the system?
- Why are we subsidising this failure with so much state money – enough, in fact, to represent a third of our real state debt right now?
- Why are we tolerating the massive redistribution of wealth from many to a few that this system permits?
- Why are we allowing so many funds to be put to idle and non-productive use outside the mainstream economy?
- What can we do better?
- Why aren’t more people asking these questions?
The sixth question is, of course, the difficult one. I’ve argued many times that, regardless of the mess caused when benefits are badly designed, setting them right is never an easy option. Redistributing costs and benefits means that whenever some people are made better off, someone else has to be worse off. The only way out of the bind is to spend more money, at least enough to protect people from the more serious anomalies; and reshaping the system of subsidies and reliefs will have to be done gradually, to ease the pain.