Why Britain needs to save far more
THERE is no better way to kill a dinner party discussion than to bring up the subject of pensions. Just ask your friends when they expect to retire, and how much they hope to earn when they stop working. The usual answer – apart from the lucky few who still enjoy final salary schemes – is that most would love to be retired in their fifties but are hopeful that 62 may be more realistic; at worst they hope it won’t be any later than 67. Needless to say, all of this is guff – people in their twenties and thirties today will almost all have to work into their seventies. But the real problem is that most people have inflated expectations of how much income they will be receiving when they retire: roughly speaking, you need to save £1m if you wish to purchase an annuity that pays out £50,000 a year; and the best cash savings rate is 4.9 per cent for a five year bond. For most people, including many middle class professionals, the thought of accumulating this kind of money is a pipe dream.
Scottish Widows’ 2010 pensions report, released yesterday, argues that we should save 12 per cent of our income every year to experience a reasonable retirement. This wouldn’t give savers an especially generous old age: those on £50,000 a year today would retire on £20,000. Yet just 48 per cent of those aged 30-65 are putting enough aside to meet Scottish Widows’ target – and 21 per cent are not saving at all. That is the worst result for four years. It is great news that the government is scrapping the rule whereby pension pots had to be converted into annuities by the age of 75 – but that should just be the start. Britain needs a cultural revolution to establish a lifetime savings culture whereby individuals regain responsibility for providing for themselves. We are already out of time.
MAKING THINGS IN THE CITY
The Square Mile today is all about finance, business services and corporate headquarters – and there is absolutely nothing wrong with that – but it was not always thus. In fact, it remained an important manufacturing centre well into the 20th Century. That is one of the many fascinating tidbits to be found in John Withington’s new book, London’s Disasters: from Boudicca to the Banking Crisis (The History Press). The author calls himself a “disaster historian” because he specialises in the history of catastrophes; but even those of a less ghoulish disposition will find much of it interesting.
In 1902, a blaze started in a waste paper basket at General Electric’s factory in Queen Victoria Street. When the fire brigade arrived, spectators were horror-struck as it was clear that the firemen’s ladders were too short to rescue the office girls on the top floors. Eight of them died, along with one young man, and the story made headlines all over the world. Ten years later, fire swept through a Christmas card factory in Moor Lane, after a young man given the job of parcelling up 1,500lb of celluloid dropped some hot sealing wax on it. The fire was out of control in a few minutes, and all the staff had to fight it was buckets of water. Again, the death toll was nine.
Withington cares about the tragedies; I care about London’s changing economic landscape. Most people are aware of Canary Wharf’s industrial and maritime heritage, as well as of that of other parts of London; so it is good that the myth that the Square Mile was always only about finance is being punctured.
allister.heath@cityam.com