The City Editor

By THIS IS MONEY
Updated:

 

ON Thursday the Government is expected to unveil proposals to raise the earliest age at which people can retire and collect their occupational pension from 50 to 55.

Behind the proposal lies a growing concern that unemployment between 50 and 65 is severe and the bias against age in many companies makes it extremely hard for people in this age group to get another job.

The belief is that companies find it easier to sack employees when they turn 50 because they can push them into early retirement; if the retirement age was higher, companies would not sack these people.

But is this true? Pushing people into early retirement might have been a sugar coating on the pill of redundancy. But if that option did not exist, the people would have been sacked anyway if the business was genuinely looking for ways to cut costs.

This is not to defend ageism, but it is to say that as a general rule incentives work better than deterrents. The Government is worried that these elderly unemployed are a drain on the State because most cannot live on their occupational pensions reduced by early retirement. In that case, a better answer might be to devise incentives to make it easier for those who have officially retired to find full or part-time work, rather than trying to stop them being made redundant or 'retired' in the first place.

One reason people take benefits rather than seek work is that the benefits cease as soon as they earn a reasonable amount. Rather than mess around with pensions, which are a sideshow to the major issue, it would make more sense to tackle this problem once and for all . That, however, would be a much tougher challenge than a cosmetic raising of the minimum retirement age.

Jackpotty

WHEN detailed plans to demutualise the Stock Exchange were hammered out earlier this year it seemed reasonable that senior executives should be incentivised with share options and performance-related pay. The Exchange does, after all, face a difficult future, with fierce competition from new and traditional market entrants and from other savings instruments.

What was probably not in the minds of those who approved the scheme was that the executives should hit the jackpot before the ink was dry on the prospectus. According to weekend reports, if the merger with Deutsche Börse goes through, it will trigger the option arrangements and the senior executive team, including new chairman Don Cruickshank, will share £8m.

Hoisting the white flag and selling out to the Germans may not be the easiest thing on earth, but it does not seem to require any special skill and is certainly much less difficult than ploughing a lonely independent furrow. I think it is the right thing to do, but I can't believe the successful implementation of such a strategy is worth an £8m windfall for the executives involved.

Closing gap

IT IS too easy for Ford to blame the probable closure of Dagenham on the strong pound. The Germans for more than 30 years from the mid-1950s had to cope with a strong Deutschmark and throughout the period their exports grew and exports of Volkswagens, Mercedes and BMWs rose even faster.

Dagenham may not be as hopeless as Longbridge but it is an old plant not helped over the years by a mix of macho management and a scratchy workforce. So productivity is miles behind that of the new British plants operated by Nissan and Honda. That is the core reason why the plant will be closed, not sterling's strength.

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