The bank of mum and dad

There was an interesting programme on pensions to the extent that anything on pensions can be interesting. See link here – PENSIONS

The programme informed that that it’s no longer sustainable to pay out on pensions because of the longevity issue hence the pensionable age is being pushed back. Those lucky to have an occupational pension in the public sector can earn more than most in employment. I know my late father received a welcome index linked £2700 per month as a retired GP. Another more extraordinary case happened to a friend of mine. A nasty looking official envelope lay unopened for a month until his wife said if it was not opened she would chuck it. My friend did open it to learn that he was entitled to compensation as he was moved without advice from a beneficial pension to a lesser one. The compensation was no mean sum although my shrewd friend engaged an actuary and extracted more.

The most interesting aspect of the programme came at the end.  Economist Roger Day observed that there is now entrenched wealth whereby a father or grandfather can pass by inheritance more than a son/daughter/granddaughter can expect to amass, however successful he or she is. The economist argued that you have to go back to Victorian times for such inequality. It’s not difficult to see again from one own’s circle how such a situation can occur. A successful young professional, particularly in the finance field could have bought a house in Fulham for £100,000 in the early 1980s. Such house could be worth £4-5 m now.  Any mortgage was paid off by time or a bonus. So two children can expect gross £2.5m respectively . They may not even have to wait for a passing. The father/grandfather might sell up, trade down and start to make life time transfers to avoid inheritance tax. You may argue that it’s entirely natural for parents to do their best for their children – if they were shrewd enough to invest in bricks and mortar, why should not future generations benefit? The government’s attempts to redress this and assist the young on the property ladder by raising stamp duty or clobbering the buy-to-let market have only resulted in a flat market. I’m told that estate agents and property lawyers have never been more inactive. Ironically a young estate agent may not be able to achieve in property what his parents  did.