Home > cultural commentary > Earnings, prices, politics, pensions and the cost of food allergies

Earnings, prices, politics, pensions and the cost of food allergies

This is a rant, and there’s a certain amount of slipslide from one theme to another – so try to keep up, please!

The story started with the general election. Out of interest I did a questionnaire on votematch.org.uk; you’re presented with a list of around 60 questions and agree or disagree with each one, and at the end it tells you which party most closely fits the political views you’ve chosen. On it was a question to the effect of ‘pensions should be tied to average earnings’ – yes/no.

Now this is actually a more technical question than you might expect. At certain periods in recent history earnings have risen faster than prices, so pensioners would do well out of this. At other times, prices have risen faster than earnings which would disadvantage pensioners.

I’m not there yet, but given that my rather modest private pension plan has come back for the past couple of years with a statement that essentially says ‘oops, we lost a load of your money’ it’s going to matter quite a bit to me if I get to reach retirement age.

I guess what pensioners really need is an option that wasn’t on the list; pensions should be tagged to earnings or prices, whichever rose more in any given year. And then you get issues like whose earnings, and whose prices.

The ONS website says it will discontinue the average earnings index from Sept 2010, for a start. However seasonally adjusted quarterly figures have dropped from over 4% in mid-2008 to around 1.7% in early 2010 (or 2.3% if bonuses are included). However this is against much higher increases in sectors such as finance, apparently up 6% in 2009, and very much more than this for the top dogs. I’ve had to pull figures from a bunch of different sources because some are quite coy about what exactly they’re reporting, but the basic point seems valid.

So I’d quite like my pension to be tagged to city bankers’ salaries including bonuses, please.

As to prices, then: financemarkets.co.uk reports inflation of 3.4% in March 2010, so pensions would at the moment do better if tagged to prices than to earnings (unless they’re finance sector earnings, of course). But there’s a sting in the tail – because pensioners tend to buy different stuff to younger people, and more of their money goes on utilities and food, which have increased by higher rates, they are actually experiencing a higher rate of inflation than the rest of us.

And it’s not just the elderly: I live with someone who has a number of allergies, which restrict the kinds of things we buy in our weekly shopping. And to take a number of little, everyday examples:

– hash browns up in the last year from 99p to £1.47 a packet, (48% increase)
– dairy free margarine (remember there aren’t too many brands to choose from) up from 85p to £1.15 (35% increase)
– baked beans, gluten and dairy free, up from 40p to 64p (60% increase – and why on earth do most of the major brands put milk and cornflour products into their baked bean recipes??)

At a conservative estimate, our shopping bill, which is based on the fact that we’re shopping for specialised dietary requirements in this household, has probably increased around 20% in the last year.

There are things we could do to minimise this – make our own potato cakes out of actual potatoes, and cook our own baked beans for example (I’m frankly not sure about the viability of home-made dairy-free margarine!). But at the same time I’m trying to turn out 1000 words/day on this or that project, so I face another issue here, of whether I spend time earning money or trying to save it.

So by way of a roundup: first, when I get to a pensionable age I want my pension to be tagged to either prices or earnings, whichever is growing fastest, And it would be a good idea for that to happen now, so the actual money amounts are decent by the time I get there, thank you. Ideally I’d like my pension tagged to that of bank directors but somehow I don’t see that happening…

Second, whatever the arrangements for pensions, indexing them to the general rate of inflation will always leave pensioners short-changed because they spend proportionately more of their income on the areas where prices historically have risen faster – food and utilities.

And third, it’s not just pensioners who have an interest in all this. If you have dietary restrictions or allergies you may well find your food bill is rising even faster still at the moment because the prices of gluten-free and dairy-free products seem to be increasing even faster than food prices generally, and these rises are massively outstripping current earnings increases unless, of course, you’re working in senior levels of banking…

Okay. End of rant.

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