Charles Dickens and today’s pensions may seem strange bedfellows but the link is there. The Poor Laws of the 1830s forced parish councils to set up workhouses for the poor designed to offer a lower standard of living than available outside. Dickens hated these as detailed in Oliver Twist and later in 1901, Seebohm Rowntree of the Quaker confectionery family published a report outlining the difference between primary poverty and its secondary variant. Previously poverty was believed to be the fault of poorer people i.e. they were lazy, idle, spendthrift etc Primary poverty is where incomes are very low while secondary poverty is caused by spending too much, wasting money and in its most recent version, adding it to the mortgage.

Result is the UK’s first State Pension of 5 shillings a week in 1909 which was means tested and payable at age 70. Germany and New Zealand had got there earlier. Current retirement age is a legacy of the Germany’s Iron Chancellor Bismarck who concerned about the cost, visited his Treasury. Asking “at what age are most of them dead?” he was told 65 which became the German retirement age and others later on.

Fast forward two world wars, there is our National Health Service with a State Retirement Age of 60 for women and 65 for men. These ages will have been equalised by 2020 but the other numbers are frightening. From average life expectancy in 1900 of 49 for women and 45 for men, they are now 84 for women and 79 for men with the gap narrowing slowly. 40 per cent of deaths in 1900 were for children under 5 whereas the figure is now < 1 per cent.

Check your own life expectancy here on the Government Actuary Department website http://www.gad.gov.uk/Demography_Data/Life_Tables/Interim_life_tables.asp

Better health and the pill result in a drastic fall in the birth rate. In 1950 for example, there are four people of working age for every pensioner. Today, the figure is 2.7 and the number is expected to fall to 1.1 by 2050. With two very expensive world wars in the first half of the twentieth century and none in the second half, living standards reach their peak just as the baby boomers born between 1947 and 1964 start to reach retirement age.

So what, you might say? It’s all about taxes or to quote Benjamin Franklin’s certainties, death and taxes.

We pay taxes to support the public sector. Starting with our borders for example, and watching TV programmes like Passport Control, there could be a pretty good case for more guys doing this work rather than less. Defence similarly as the freedoms we all cherish are a bit academic without it. Our Armed Forces are stretched thinner and thinner and in the case of soldiers, buy their own boots as the issued ones aren’t up to the job. Afghanistan is becoming our Vietnam and with the UK’s worst ever military defeat also in Afghanistan in 1842, history really does repeat itself. Count myself fortunate to have visited this beautiful country in my youth where the image of a cobalt blue sky reflected in mirror-smooth paddy fields with new irridescent green rice shoots coming through, all set in red sandstone valleys under bright sunlight, still haunts me. But I digress.

Growth of the public is most worrying with 700,000 more public servants than 1997 and nearly 1 in 5 of the workforce paid for by taxation. Gold-plated pensions for this group will now cost £1.2 trillion. A public sector payfreeze is now mooted but it’s all too little too late – will the current government hobble the public sector or its pensions? With a regime that can create a Better Regulation Executive (it used to the just the plain Ministry of Better Regulation) http://www.betterregulation.gov.uk/ suggesting that the others aren’t doing a very good job – unlikely. It’s bit like a prayer my grandfather had to say in school:

God bless the squire and all his graces

And keep us in our rightful places

But the squire and governments make the rules, printing more money like their predecessors debased the coinage and the cost can be deferred onto our grandchildren. One wonders when these little dears get the vote, take a look at the mountain of debt and all these oldies to support will finally say enough, or perhaps they will reinvent the workhouse?

Some people are aware but few have the courage to say much. Early in this Government, Frank Field was told to “think the unthinkable about pensions” but it cost him his job. His legacy is the Stakeholder pension but this has not been the panacea it was supposed to be, as people on low wages in primary poverty if you like, don’t worry much about pensions. Lord Turner’s recent announcement that he wasn’t radical enough in his previous pension report http://news.bbc.co.uk/1/hi/business/4482528.stm helps a bit, but is not enough.  Raising the retirement age to 70 will mean 27% of men and 17% of women dying before receiving their pension benefits. At least with a private pension something can be passed on to your family but with the State pension, die early and you lose everything even after paying into it for your whole life.

But as always there is good news. An estate agent brings forward plans to move into property management and his gardening business is now very busy, no problems putting bread in the table for his young family or paying the mortgage and still time for the occasional viewing when needed. Another marketing company reduces its staff from 5 to two and half people but has now recruited someone again – turnover down but profits up. Last but not least, most millionaires started their business in a recession.

Unhappy with rates on your deposits or need to borrow and can’t?? Web technology allows ordinary mortals to lend or borrow by matching one side with the other - without the banks.

One site is http://uk.zopa.com/ZopaWeb/ and another is  http://www.firstfunding.org/ As someone who originally trained as a banker, this is interesting to say the least. Like any new investing or new financial territory, do your homework and read the small print. There is unofficial stuff about these sites on the web as well and if you are not happy then don’t – no point in giving yourself sleepless nights for a slightly higher return.

But if you are prepared to take the risk, the higher returns could be there.