Pensioners could do worse than to grow their own food. And people who have not reached the pension age had better start investing in the skills needed to provide for themselves. They will need them, warns Henriëtte Prast.
Junior social affairs minister Jette Klijnsma hit the nail on the head when she said pensioners should have something that will boost their income, such as an allotment or a house. In the financial world this is called hedging and in pension terms it’s described as replacing private consumption with household production. This is why Labour party leader Hans Spekman is completely off the mark when he says Klijnsma’s comments are ridiculous and stupid.
Allotment as asset
Future spending on accommodation, food and other necessities are a given on life’s financial balance sheet, a liability to yourself, so to speak. There’s no avoiding it. If you pay off the mortgage and get yourself an allotment you are putting an asset against an obligation, an asset whose value fluctuates. And that means you have covered some pension risks.
The house is an asset whose value reflects the cost of having a roof over your head. The value of the allotment reflects the cost of fruit and vegetables. If vegetables become more expensive you do not suffer the consequences.
A pension is income necessary to maintain a certain living standard once a person leaves the labour market. Instead of selling labour (work) and buying goods with the proceeds (making others work for you), you can cater for yourself. When a person stops working, time becomes a much less scarce commodity than money.
At this stage optimum planning of the life-cycle entails spending more time and less money on the living standard you wish to have. You bake your own cake instead of buying one, you become your own handyman, you ask people round for a meal instead of going to a restaurant.
These are all examples of optimum planning which, apart from anything else, also increase pensioners’ autonomy by decreasing their dependence on share fluctuation, inflation, cover ratios and relative price changes.
In a time when workers are being landed with a pension risk, taking classes in vegetable growing, making preserves, knitting, sewing, plumbing and baking cakes is not such a bad bet. These skills will stand them in good stead once they’re pensioners. And Spekman could do with some classes in personal finance.
Henriëtte Prast is Professor of Personal Financial Planning at the University of Tilburg.
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