a fat man falls in the water

political history viewed through the lens of pensions

I have a vague idea for an Adam Curtis-style documentary, stitching together old video clips and news reports to illustrate a thesis; that the political history of Britain since Thatcher is basically all about pensions regulation.

My episode plan would probably be something like:

1. “A fat man falls in the water”.  Robert Maxwell died in late 1991, and by mid-1992 it became clear that he had raided the Mirror Group pension funds to support his empire.  This resulted in the 1995 Pensions Reform Act, which introduced a specialist pensions regulator, along with the concept of a Minimum Funding Requirement.  The minimum funding requirement, among other things, required pension funds to invest in less “risky” assets, and calculated their solvency based on longevity risk and the yield they were earning on their investment portfolio.  The immediate consequence was that normal, defined-benefit pension funds became much more expensive to offer, and companies started to close them to new members.  The longer term consequence was that pension funds stopped investing in equities, and became very exposed to falling interest rates. (Clips: Lots of Maxwell, obviously, also workers striking over pension fund changes, people complaining about the difference between private and public sector schemes)

2. “Allied Crowbar”.  Between the revelation of Maxwell’s crimes and the 1995 Act, the British financial system had to recognise the existence of another scandal.  Since the late 1980s when the state pension rules changed, people had been encouraged to invest in private pension schemes.  These, unfortunately, were aggressively sold by commission-based “advisers” and a lot of investors were given extremely bad advice, leaving them much worse off.  This was the first of a series of “mis-selling scandals”, each of which led to a tightening of the rules, until the financial advisor profession was reduced to a fraction of its former size and very severely restricted in what it could do.  (Clips: Plenty of scope for champagne-swigging 80s yuppies and retro TV ads for firms like Allied Dunbar.  Montage of CEO apologies)

3. “The ripples spread”.  By the end of the 20^th century, the British middle class had all but completely lost faith in financial markets for saving, and frankly who could blame them.  However, a new product was on the horizon.  The changes to the Assured Shorthold Tenancy system in 1997 created a new financial product – the “buy to let mortgage” – and encouraged people to invest in bricks and mortar.  This was also the beginning of a multi-decade period of falling interest rates, which sent property prices soaring, made debt cheaper and cheaper and more or less completely destroyed the finances of the pension funds.  Many pension funds were forced to “reach for yield”, buying more and more complicated financial products.  Meanwhile, other countries’ pension funds (like the Ontario Teachers) began to buy up global infrastructure assets.  (Clips: Vox pops talking about “bricks and mortar”, credits of all the property shows.  Ominous trip-hop music as we get into the financial crash, queues outside Northern Rock branches etc).

4. “OK Boomers”.  One thing people hadn’t noticed about life assurance salespeople and financial advisors is that they were pillars of the community; because they lived off generating sales leads, they joined and organised a lot of organisations.  Golf clubs, Rotarians and all that, but also, in great size, the Conservative Party.  As their industry was gradually wound down, this cadre also disappeared; many individuals went over to UKIP.  Interest rates continued to fall, making people who had invested in property very happy and people who had continued to rely on pension funds considerably less so.  Everyone got older and crankier.

I’d illustrate that with a bunch of clips of toffs in ties, montages of UKIP candidates and so on.  I’d also have a silly aside looking at the Church of England pension fund, and how its solvency was greatly improved by the decision to ordain women (it caused a lot of priests to leave the church, and its pension fund, on relatively unfavourable terms). Then sort of segue into a “where now” section. 

Because it’s worth remembering that (because of rationing) the UK’s baby boom had two peaks – an immediate postwar blip, and a much later second boom.  The peak year for births was 1964, which of course was only sixty years ago.  The second boomer generation are only just beginning to retire, and the big flow into retirement is going to happen over the next decade or so.

And that might be a problem.  The UK gradually tamed its problem of mis-selling, but replaced it with a problem of “non-selling”; many of the people who would otherwise have been stuffed full of overpriced endowment product have instead got either no meaningful retirement savings at all, or a little buy to let flat that they might not be able to maintain.

(Fade to a black screen, with the JK Galbraith quote on it: “All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership.)