Knowing and Making

This article on pensions from the Economist made me wonder about something. It used to be that people in the UK were compelled to buy an annuity on retirement with their pension savings. Well, almost compelled - if they took it out as cash, they'd have to pay tax on the lump sum. So if I saved for ten years at 22% tax relief, and I then withdrew the sum, I'd have to pay 22% tax on the withdrawal. Fair enough - the idea of pension tax relief is to encourage people to build up an income which would stop them having to draw on state benefits in retirement. If I can withdraw the cash, as if it were a standard savings plan, then the tax treatment should be the same as if I'd saved the money outside of a pension. But could this be used to game the system? What if today - with top tax rates at 50% - I think that the income tax rate is higher than its long-term average. Then I might save in a pension now, intending to withdraw later when tax is cut back to 40% or lower -...

Robert Peston writes an entertaining, slightly scary, story about BT's pension liabilities . But is this anything to worry about? Not really. He makes a few points that sound striking, but under closer examination are utterly unsurprising. ...in an economic sense, BT's current and future pensioners own this totemic business. True, but any business is "owned" both by its creditors and its shareholders. The creditors always have to be paid off first before the shareholders have clear title to the company's assets. And in most large, old companies, pensioners are among the biggest creditors. Look at General Motors, which has just handed over a majority stake in itself to its pensioners (via their union, the UAW). To put this £8bn chasm in its pension-scheme into an appropriate context, the entire market value of the company is less than £10bn. Also true, but meaningless. The pension deficit - like any other debt that BT has - is already factored into its market value...

As I start this posting, I have no idea what I'm going to write about. But surely there must be something? The guy has been so pilloried that his real attributes must surely be better than his public image. Goodwin has just agreed to give back a chunk of his pension , helping the government achieve its political objective, RBS get rid of a distraction, and Goodwin himself look at least a little better than before. But looking further back, surely there were people who thought he was good at his job in 2007? With so many executives hagiographed in the business press, he must have had his turn. So what can we dig up? Start with a Google search for " Fred Goodwin achieved ". Amazingly, there is only one link: someone defending him on the grounds that the cost of his pension was only a small fraction of RBS's losses , and that by performance-related pay standards he does better than the Bank of England. Similarly, " Fred Goodwin succeeded " returns nothing, and ...