21st March 2014

Stupid is as stupid does

“Pensioners should be trusted to use their retirement savings however they want”. 

I must confess to being a little annoyed at what many saw as a condescending remark from pensions minister Steve Webb.

This was from the same vein of political wisdom that stretches back to John Gummer, now Lord Debben (yes, the APFA chairman) and his ‘beef burger’ moment

There is no doubt that this creates the opportunity for more people to make better informed retirement choice and it is also an opportunity for financial advisers to demonstrate value to potential annuitants.

But I do not see this as being the intention.

Firstly, regulation today is based it would seem, upon consumers being protected at all costs from themselves, irrespective of advice given, irrespective of changed circumstances, irrespective of changes goals or aspirations.

In light of this it seems a complete about turn (from a government that mandated the FCA) to now suggest that “Pensioners should be trusted to use their retirement savings however they want”.

This is not about a generous and thoughtful government empowering the ‘silver surfers. This is a tax grab, a way of the government ensuring that the aged consumer, previously known as a vulnerable consumer, can now ensure that an advance on IHT can be made before they die to reduce the national debt and provide funding for third world aid programmes and more unmandated social engineering and politically correct projects before the next election.

Based on the understanding that after the 25% tax-free cash withdrawal the balance, when taken, will be subject to marginal taxation, pots big and small could find themselves being taxed on that hastily drawn down balance if they decide to take the money and run rather than take independent advice and hold fire. 

We should also be in no doubt that the meager savings of many or the substantial savings of the elderly generation in whatever form have been subject to vicious fiscal attack from governments over the last 20 years or so. 

Pension funds raided by Gordon Brown, caps put on the size of pension pots, tax then put on top at the highest rate, tax relief limits reduced and so on.

At the same time, governments have then decided that the villains of the piece are financial institutions and the advisory community for charging too much, being unfair, not being flexible…. the list I guess is endless.

Governments have a difficult time I balancing the books, especially in a coalition government. After all as Donald Rumsfeld once said "If you try to please everybody, somebody's not going to like it."

In this case what I am getting concerned about is that this industry is seen as the ‘whipping boy’ when in reality much of the problems that savers, pensioners and taxpayers endure are as a direct result of poor government, poor regulation and distinct lack of political foresight and common sense.

Bubba may know everything there is to know about the “shrimpin' business”, but Steve Webb knows nothing about anything it would seem.

Pensions, Panacea Comment