Those familiar with Saturday kitchen will know that one person’s food heaven is another’s food hell. Whatever George Osborne says on pensions this afternoon is bound to polarise pension people’s views.
So here’s the Pension Plowman’s guide to the predictable reactions to Government announcements
|Osborne says||Pension numpties hear..||Grumpy old men grumble..|
|“Pension Freedom”||I wanna get loaded and have a good time||Your money’s going to run out and I’ll have to bail you out|
|“No one will ever have to buy an annuity again”||Annuities RIP||Your money’s going to run out and I’ll have to bail you out|
|“You can have your pot as cash”||Tax Free Cash||Taxi for HMRC!|
|“Pension Bank account”||Cashpoint.||Here today, scammed tomorrow|
|“You can swap your annuity for cash”||And get my money back||Fleeced once, fleeced twice|
|LTA reduced to £1m||What’s this got to do with tennis?||Bosses driven away, further nail in DB coffin|
And here the people who will be making all the noise this afternoon
|Five tweets to follow for #budgetheaven||Five tweets for #budgethell|
The big issues facing pensions are how Mr Pension gets taxed and how Mr Pension gets spent.
Those who live on the wrong side of the tracks reckon that people are fundamentally dumb and will take Mr Pension for a tax hair-cut of epic proportions. These people also believe that given a fistful of readies, Mr Pension will hurry down to the local supercar salesroom and put a deposit down, I doubt not that some pensioner is being sponsored by some journalist to do this as I type.
Those on the right side of the tracks are enjoying a nice cup of tea and a slice of lemon drizzle cake in the offices of Ms Michelle Cracknell. I happen to be floating on a pensions cloud but can understand the frustration of my friends in budget hell.
Were anyone to ask me
Plowman – why do your remind us of the Pig of Happiness?
I would of course reply
– because I know the people running companies who are going to profoundly influence the way people behave who I have a profound respect for. Steve Groves at Partnership, Rodney Cook at Just Retirement- the entire management team at L&G, many special people at Scottish Widows, Royal London, Standard Life, Friends Life, Prudential Aviva and Aegon.
I do not see these firms encouraging irresponsible behaviours, I see them actively participating in a debate on risks in retirement which is long overdue.
I am also a believer in the power of people to act with collective wisdom. That does not mean there will not be folly, nor that that folly won’t be reported as if it was the new normal.
People want choice, but once they have it, they will generally not use it. 72% of people, when asked what they wanted from their pension pot, described an annuity. Given choice, most people will default to the new normal which is unlikely to be either an annuity or a SIPP.
But for that new normal to emerge, we need this Budget kitchen with the polarisation of views creating some kind of synthesis over time.
Why I am a Pig of Happiness not a grumpy old man is that the alternative, the catastrophe of people locking into low interest rates for the rest of their life when purchasing an annuity product they neither understood or wanted is over.
Sometimes it’s not taking the choice, but having the choice that matters most!
There may be 10 or 20% of the 6 million annuitants in this country who bought the wrong product (which is not the same as saying they were mis-sold). People need the choice to revers that decision, if only to reject it.
I suspect that as many people will dislike this blog as like it. Those in budget heaven and budget hell will make themselves known, ignorance will be rife but so will good sense. Eventually a new normal will emerge, I know what I want the new normal to look like –and I want it to restore confidence in pensions.
Whether you are in budget heaven or hell this afternoon, I wish you luck, I will be at Shakespeare’s Globe Theatre with my friends from Aberdeen Asset Management, working out just what the Chancellor’s cooking tastes like.