I was listening to the radio program Money Box Live last week. They were talking about pensions. It seems that if you delay taking your pension for a year then the amount of your pension increases by about 10% per year when you do take it. I guess this is a government scheme to reduce spending on pensions today at the cost of increasing it in future years, perhaps when there may be another government in power – but that’s not the point of this article. The thing that caught my attention was that they got a mathematician to describe the best time to take your pension.
The longer you delay, the higher the pension when you take it, but the less time you take it for. So if you know when you are going to die (which you can look up in statistical tables) the mathematician was working out a time at which the total amount of money you receive reaches a maximum.
All very logical and calculable, so why am I writing about it? Because it is a symptom of the cancerous thinking that underlies so many decisions today:
Our goal is to maximise the money we get, even if we only get it on the day before we die.
We forget that the more we have, even when we don’t need it, the less there is for others.
We don’t consider that the schemes we invest our money in minimise costs, such as the wages of the lowly paid, or maximise income, such lending our money at high rates of interest.
We ignore the fact that making decisions on the basis of maximising our income reinforces the extremely unfair financial systems that we have today, where the rich are getting richer and the poor are getting poorer.
It is not easy to turn down opportunities to make more, or spend less. It is natural to want to buy the cheapest milk, or trainers, or energy – but each decision has its consequence.
When we invest to minimise our tax bill, we are placing the burden of paying for our public services on others. We are encouraging our government to introduce ‘austerity’ measures – “sanctioning” benefit claimants if they miss an appointment (in effect, fining them 100% of their income). We place the burden of balancing the government’s books on the poor.
My mother died last year. She didn’t spend the pension she received, and her investments grew, and we were surprised at the amount of money that she left. I have to decide what to do with the money I inherited. Money Box Live would tell me to invest to maximise my income. But I agree with Pope Francis, I reject that basis for my decisions. How about you?