Jeff Salway: Banks' PPI sob-story is a shameful way to point the blame

IT WAS the PPI wot dunnit, the banks wailed last week.Barclays, Royal Bank of Scotland and Lloyds were more than happy for the costs of compensating customers who were mis-sold payment protection insurance (PPI) to be at the forefront of their first-half results.

Not much they can do about it, they reasoned, so they might as well say they'd have performed well but for the pesky PPI burden.

"We would have made a profit, but we had to spend millions compensating people who we deliberately and systematically ripped-off over several years, with no remorse or even acceptance that we were treating them unfairly," is what they didn't say.

Except the PPI costs that caused the losses didn't just happen, like an act of God. They were the result of wilful, conscious mis-selling on a massive scale that would still be going on today if consumer groups, the financial media and, eventually, the regulator hadn't brought the gravy train to a juddering and expensive halt. Yet PPI is being viewed as an error that is now being rectified, which is certainly not the case. The consequences are being reduced to bad debts, and there's little evidence that the banks have even tried to learn the lessons from a shameful episode that tarnished an already battered reputation.

Analysis by the Department of Work and Pensions found that 20-year-olds today are almost twice as likely to reach 100 as their parents. There will be nearly 280,000 centenarians by 2050, compared with 11,600 today, reflecting improved medical diagnostics, treatment, living standards, working conditions and health.

That would seem to send out a simple message to policy- makers - keep raising the pension age and rethink the traditional approach to retirement, which currently means many people are retiring in their early 60s and having to make their savings last for 30 years or more.

We need to start that process now, incentivising companies to review their traditional attitudes to older workers and encouraging more part-time and reduced-hours working to facilitate the growing number of people in their 60s and 70s who simply don't want, or can't afford, to fully retire.

It's not just employers that have to think again. The debate over public-sector pensions showed that there remains a yawning chasm between expectations and reality.

Increased contributions are not the only point of contention in that debate, with complaints over having to work longer for a potentially reduced pension. But look at the life expectancy projections for the next 30 years and say, with a straight face, that there's an alternative to working for longer.

There's a welfare state message to take from the figures too, as rising life expectancy will come hand in hand with increased inequality between people of different generations and socio-economic backgrounds.While keeping individuals in work for longer tackles some of the problem, it will also fall to the state to ensure that the millions of people living for years in retirement on paltry pension pots are not consigned to poverty and desperation.

The flat rate pension being introduced in this government will bring much-needed simplicity and transparency to the system. But will it be fit for purpose in even ten years' time, let alone 30?

Gordon Brown's tax credits system was a good idea that was less effective in practice, but an approach that allows for top-ups for lower income pensioners may become the norm once more in the years to come.

Much has been written about the reasons for the erosion of trust in the pensions system, not least in this space. The government and the financial services industry generally take the blame, but the media are also culpable.

Some of the coverage of the markets crisis reminded me of the contribution made by the fourth estate to the low esteem in which pensions are now held.

Readers of one middle-market tabloid were told their retirement dreams had been shattered after millions had been wiped off the value of their pension funds. Others were more restrained - just.

The reality is that for all but an unfortunate minority, the losses remain paper losses that will almost certainly be recovered. Yet the more hysterical coverage saw advisers inundated with requests from panicked investors wondering if they should cut their losses. Unless retirement isn't imminent, and especially if you have a well-diversified investment portfolio, the turbulence will be long forgotten by the time you retire.