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article imageOp-Ed: Who is to blame for the coming national strike in the U.K?

By Alexander Baron     Nov 28, 2011 in Business
It is estimated that up to 2 million public sector workers will be walking out tomorrow in the U.K. The unions blame the government; the government blames union militants. But who is really to blame?
The latest polls indicate that broadly, the public is sympathetic to this strike, which the public sector unions have mounted as a protest against Government plans to cut their pensions and make them work longer before qualifying for same. The Government is of course opposed to this action, while even the Opposition is lukewarm. Yesterday, Michael Gove, Secretary of State for Education, mounted a fierce attack on the militants he claims are responsible for this action, but this is not a case of militants leading and the sheeple following. It is also fair to say that most rank and file union members don't want to strike, lose pay and cause disruption to the public anymore than does anyone else, but they feel they have been backed into a corner. So is this the fault of the Government, or is it the fault of (greedy) union bosses? The answer is that this is the wrong question; the question we should all be asking is why have pensions suddenly become so expensive?
The simple answer is that they are being plundered. If they were administered properly, contributions would be a lot less. This is not a new story; the reader is invited to cast his mind back to a BBC Panorama programme that was screened last year. The programme is no longer available on the BBC's website, but some public spirited person has uploaded this and this to YouTube. Check this out, too.
The point we should make is that it doesn't matter whether we are talking about private pension funds or state run funds, it is the system that is wrong and needs changing. What do the people who “manage” these funds actually do? What constitutes management? The simple answer is that they move funds from A to B, from B to C and from C back to A again, that is, they play the stockmarket. They also play other markets, in particular the market in government bonds. To play in this context means to gamble, literally that. What else would you call buying at price A hoping to sell for price A+b or selling for price A hoping shortly to buy back the same stock at price A-b?
The fund managers, the people you entrust with your pension, are paid whether or not they make a profit, or generate any growth for your retirement nest egg. While it is true that most of these funds do grow over the long term, this is more by accident than by design, because the stockmarket grows over the long term, and the longer a fund invests, the greater the chance of a decent return.
We said earlier that neither the Government nor the unions are to blame; that is not strictly true. The Government could rectify this scandalous state of affairs by removing the power from these fund managers, certainly as far as public sector pensions are concerned. It has gone some way towards that with its NEST scheme, but it would be far better if public sector employees were to pay into a fund whose custodians didn't play the stockmarket but simply invested their money on their behalf in equities, government bonds and anything else the Government considered suitable. The money could simply be held in trust and paid out to people as they retired. That way there would be only a tiny administration charge and no management funds: no bonuses, no advertising or office expenses, no fees for analysts or economists, nothing.
The resulting savings would probably mean the contributions of individual workers could be considerably reduced. Why doesn't the British Government or any other government do this? Because there are too many parasites battening on the system, and too many people with their snouts in the trough. Including politicians of all shades.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
More about Panorama, pensions rip off, National strike, Michael gove, Nest
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