Shares of what?
A lot of press verbiage over the last couple of years has been on how bankers are overpaid. Of course it is not just bankers I have also read stories about company bosses, sports stars, BBC executives and even civil servants. There has also been a lot of analysis of the reasons behind it. Partly it is the rise of the cult of the individual - the belief that organisations are made or broken by the most influential people in them. I think it is also significant that pay is determined by a board of people with far more in common with those whose pay they are deciding than with other interested parties.
The point of this post is to link this with the financial issue that really affects me - pensions. In the last 10 (ish) years while salaries to the highly paid have greatly increased the stockmarket has remained stagnant. This has left many pension funds underfunded and caused a lot to reduce benefits. I don't think these are unrelated. Profit that the company could return to the owners, the shareholders (us through pension funds) it has paid to senior employees. There is a belief that sooner or later shares must start to go up in value but if companies continue to skim profits this is hardly inevitable. Perhaps we are looking at a change in paradigm as the switch in early capitalism where share dividends came to be accepted as lower than bonds. Previously shares had been seen as risky but after they were seen as being worth more as the profits of a company caused its value to rise.
So where does this leave us? Giving your money to a pension company who will pay their executives loads and deduct the cost in charges seems like a poor return even if you do get a tax break (though if your employer puts in enough extra it may be worthwhile). The money is also tied up so you may not get it at the time you need it. Share ISAs seem even more likely to give a low return - though at least you can choose to pay in when the market is low. I don't have an answer but it does seem like a problem that has more direct relevance than the general irk at the director of Goldman-Sachs awarding himself a 100,000,000 bonus.
The point of this post is to link this with the financial issue that really affects me - pensions. In the last 10 (ish) years while salaries to the highly paid have greatly increased the stockmarket has remained stagnant. This has left many pension funds underfunded and caused a lot to reduce benefits. I don't think these are unrelated. Profit that the company could return to the owners, the shareholders (us through pension funds) it has paid to senior employees. There is a belief that sooner or later shares must start to go up in value but if companies continue to skim profits this is hardly inevitable. Perhaps we are looking at a change in paradigm as the switch in early capitalism where share dividends came to be accepted as lower than bonds. Previously shares had been seen as risky but after they were seen as being worth more as the profits of a company caused its value to rise.
So where does this leave us? Giving your money to a pension company who will pay their executives loads and deduct the cost in charges seems like a poor return even if you do get a tax break (though if your employer puts in enough extra it may be worthwhile). The money is also tied up so you may not get it at the time you need it. Share ISAs seem even more likely to give a low return - though at least you can choose to pay in when the market is low. I don't have an answer but it does seem like a problem that has more direct relevance than the general irk at the director of Goldman-Sachs awarding himself a 100,000,000 bonus.