I am writing this blog from Ecuador while waiting for a flight to Amsterdam. I was returning from a trip to South America, including the Galapagos Islands and put aside categorising my photos in favour of writing about pensions. And yes, I am that sad!
Ecuador is an interesting country that sits on the equator and has three different climates; cool and misty in the Andes, hot and wet in the Amazon while hot and dry in the coastal regions. They grow the best coffee and chocolate in the world and make an interesting tea from Coca leaves that is good for digestion and altitude sickness, which I didn’t realise is illegal to bring into the UK (sorry Officer). It also takes a long time to get to Ecuador from the UK!
It is about to hold an election which will be fought between the left and the hard left (no right wing here) and is currently suffering from a spat between its president and vice president. It is a strong democracy - all citizens are required to turn up to vote if they want a certificate that allows them to buy property, take out a loan or get a passport. Of course they are not compelled to actually vote – spoiling papers with “none of the above” or a doodle is OK.
It is a middling poor country where the minimum wage is $400 a month (a quarter of ours in the UK), but fresh food is cheap and plentiful because of the rich soil and moisture in most of the country.
It is also progressive, with a sophisticated benefits system with an old age pension, payable from any age with sufficient contributions. The pension is a compulsory social insurance which pays a minimum of $200 a month, based on average wages and years of contributions from employees, employers and government. 40% of the pension is paid for by the state. Voluntary provision sits on top. Education is viewed as a priority and is free to all citizens. A lot of effort goes into conservation and environmental concerns too.
However, despite all it has to offer, there is no escaping financial fraud; although Ecuador is well below the UK in financial crime rankings (UK is number 30, Ecuador is 75), it suffers from tax evasion, bribery and corruption with some social media scamming. There are no pension scams because of the nature of the pension system, but a couple of UK brokers have recently been found guilty of promoting fake investments in an Ecuadorean gold mine. How shameful that it is scamming Brits once again!
I got to chatting with a cardiologist and a lawyer from Seattle, US, who are approaching retirement and interested in pensions. They were horrified to hear how we treat pension fraud victims in the UK by applying tax charges on top of huge financial losses and how fraudsters only have a 1 in 3,000 chance of being caught and punished. They reminded me of the much better system in the US, where the IRS has rightly concluded that trust in the financial system comes from helping victims and pursuing and punishing fraudsters. They also reminded me that nearby in Canada, the government also works hard to be fair to victims of fraud, by supporting, not penalising.
Why is the UK so regressive? I can’t explain it, although I have spent years trying to understand. I have offered easy solutions to government ministers, peers and officials, but everyone is stuck on the old treadmill. They are like the Booby (left, in the photo above) – let the Frigates steal their eggs and look around with surprise. If only they would lift their heads above the parapet, government would see that pursuing criminals and supporting victims is a virtuous circle. Pursuit of fraudsters raises revenue and discourages others. Supporting victims ensures they can continue to work and save and spend in retirement. It also delivers the holy grail of trust in financial services, something we badly need.
We have a Labour government that wants to make a difference – changing the way HMRC and law enforcement operate would be a sure way to restore trust and help the economy. Let’s join the progressive nations.
Margaret Snowdon, Chair of PSIG
