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The myth of the ‘poor pensioner’ helps shield the City

Phillip Inman
·4-min read
<span>Photograph: John Sibley/Reuters</span>
Photograph: John Sibley/Reuters

Pensioners are a useful defence in the City’s fight to preserve its privileges. Unwittingly they are wheeled out as human shields by the finance industry, and increasingly major corporations, to serve and protect probably the most powerful interests in the UK.

The over-65s – or in many cases the over-55s, given the extent of early retirement – function as a high wall against accusations of tax avoidance, financial plundering and executive enrichment, because the world’s pension funds are benefiting.

So it was last week, when the former Conservative minister Esther McVey told the UK’s biggest supermarkets to hand back about £1.9bn in business rates relief given as a financial cushion in the pandemic.

The controversy centres on the dividend payments to shareholders made by Tesco, Sainsbury’s, Asda and Morrisons, which McVey said should only have been paid once the companies were free of subsidy.

Sainsbury’s disclosed business rates relief worth £230m in the first half of its financial year, while paying £231m in dividends, and in October, Tesco announced a £315m dividend despite receiving £585m in relief.

There is no way executives can justify sky-high personal rewards unless they can declare their businesses fit and able to pay dividends. If much of the money has come in taxpayer subsidy, no matter.

One analyst, Clive Black at stockbroker Shore Capital, spoke for the City when he told the Times it was “absolutely right” for Sainsbury’s to look after “its retail and pension fund shareholders”.

Meanwhile, Telecom Plus – a FTSE 250 utility company – paid a dividend for the same period as it claimed furlough funds from the government. In a response that mimicked Black’s comment, it said: “We ensured those shareholders who are reliant on the dividends would retain this important source of income.” Asked if the shareholders it had in mind were pensioners, the company said yes.

Individual shareholders own just 13.5% of the London stock market. UK pension funds own 2.4%. The largest slice is held by overseas investors, with 55%

And what is good for British corporates also works for global investment funds. BlackRock manages more than $7 trillion (£5.3tn) of funds and makes it clear that lobbyists for the organisation represent the interests of hardworking pension savers.

There is no reason to single out BlackRock, other than it is the world’s largest private investment company and the boss of its research arm is touted as a possible Treasury secretary in Joe Biden’s White House. Would the appointment mean the new president leaves the fund management industry alone?

In the UK, BlackRock has recruited former Tory insiders, such as former chancellor George Osborne, presumably in order to stay in touch with the plans, such as they are in the Covid era, being hatched by City regulators and Rishi Sunak’s Treasury department. In Brussels, BlackRock has a huge team that aims to make the voice of the investor heard inside the EU.

Separately, a report last week by the Tax Justice Network estimated that £427bn is lost annually in corporate tax avoidance, mostly by companies shifting profits to low- or zero-tax jurisdictions, and by wealthy individuals using those same havens to evade local taxation.

This money is channelled through the major financial centres into stocks and shares, property and government debt – all with the acquiescence of a finance industry that wants the public to think of its clients only as pension savers.

Any government considering a clampdown will be told that it risks increasing the costs of administering financial transactions. Profit margins are sacrosanct, so investors will need to pay this extra bill.

It doesn’t seem to matter that the ageing and poor pensioner is largely a myth, at least in the arena of private investing.

The latest figures published by the Office for National Statistics show that individual shareholders own just 13.5% of the London stock market. UK pension funds own 2.4% and insurance companies, which could be said to be investing on behalf of pension savers, account for a further 4%. Collectively, that is less than a fifth of the market. The largest slice is held by overseas investors, who own 55%. So what was true in 1981, when individuals owned 28.2% and overseas investors 4% of the London market, is no longer the case.

Without the spectre of the individual saver – one that relies on a dividend payment to make ends meet – ministers have more leeway to tackle the likes of Sainsbury’s over its Covid-related tax breaks. They could also pressurise global fund managers to participate in far-reaching reforms of the City. It is an opportunity they should grab.