Monday, January 16, 2012
Could … if, but probably won't
The EU’s new pension proposals will make us £600 billion poorer, claims Abhijit Pandya in the Daily Wail today, demonstrating the classic scare technique that invariably amounts to nothing – or very little. Such a scare starts with a hypothesis: "if such and such prevails". Then we get the projected consequences, usually vastly inflated, offering a diet of disaster and dismay. And, as here, another scare is born.
"Make no bones about it", warns the hyperventilating Pandya, "this cost will impact significantly on corporate growth plans, on companies struggling in the recession, and most importantly: the pockets of employees". But it won't. Pandya is cribbing from a story that was doing the rounds on and around 5 January, in specialist journals and the like, which say no such thing.
The story itself is based on research carried out by J P Morgan Asset Management, served up in an 18-page report, which suggests that if the solvency requirements applied by EU law to insurance companies are applied to pension funds, there could be a shortfall £600 billion in the capital fund.
This is in fact a worst-case scenario and has been estimated in response to a review of Directive 2003/41/EC of 3 June 2003 "on the activities and supervision of institutions for occupational retirement provision".
Potentially, there are huge problems, but it is early days yet. Says an earlier report, "there is a good chance the worst will not happen", and even if it does, there are ways of restructuring pension plans which would exclude them from the worst effects of any new law.
But this is not good enough Abhijit Pandya. "Could" becomes "will" and his narrative becomes one of the EU "planning to force companies to increase their pensions pools" through new policy "that will cost, according to the bank JPMorgan Asset Management, the UK’s economy an astonishing and extraordinary £600 billion".
I really do get sick and tired or this. There is a complicated story here – rightful concerns about the way the EU is muscling in on the pension business, and creating all sorts of problems and costs. We could use some specialist help here, but instead we get this sort of inane exaggeration which serves no purpose at all.
We should be able to rely on our media to inform us, but it has long ceased to carry out that function – if it ever did. Here, though, we have a newspaper which ignores the elephant in the room when it comes to breast implants but then goes totally over the top when it comes to a report about pensions.
There is no fathoming this industry – there seems no sense or logic to it.