The Conservatives say they want to reward hard working people. I’d like to thing they include me in that number.
They want to appoint Ros Altmann to help us educate ourselves in finances, I’d like to think I’ve been educating myself.
Since I started working, I’ve been squirrelling money from my pay into personal and company pensions month after month for nearly 400 months, that’s nearly 35 years. The result is that I have built up a big fat pot (I brought my pots together in 2013).
I haven’t sunk all my money into bricks and mortar, I didn’t buy to let, I invest my savings in the global economy and I intend to keep invested for years to come.
I intend to keep on working after my 55th year for decades to come and to continue saving as I have always done. I want to provide myself and my family with the security of knowing I am financially sufficient and will not be a burden on them whatever happens to my health, no matter how long I live.
I have a financial plan and it involves me using financial products that afford me tax privileges. I earn well above average earnings and I pay a lot of tax, where there is a taxation promise I expect it to be kept. If I cheated on my taxes I would expect to be punished.
I don’t earn £150k but I don’t have a grudge against those who do. The irony is that despite the spoof headline below, Cameron and Osborne are screwing up the pensions not just of people like me, but the super-achievers who they most fawn to.
So far so good. But let’s look at what is happening to my plans. My pot – according to George Osborne runneth over. He started at £1.8m, reduced this to £1.25m and now is telling me I cannot save beyond £1m. He implies I am a fat cat, but that £1m will buy me a not so big fat annuity of around £27,000 pa if I want to exercise my freedom to purchase at 55.
That is not what I call rewarding a hard working bloke for working for 35 years, nor is the prospect of having to walk away from pension savings around now (I am 53) what I had planned on doing. Nor is it what we educate people to do at First Actuarial.
I don’t agree with John Ralfe on much, but I do agree that his dictum
“work longer, save harder, save longer”
is fair and honest and credible to the average hard working person.
Two out of three of those instructions are denied to me, or at least I am denied the right to save longer and harder into a pension,
People are instinctively drawn to income (and I am no different). I dread the idea of cashing in my pot, paying 45% tax on a big slug and then sitting on a big bank balance, paying 0.1% interest on which I am taxed again. That is not why I put money into a pension all these years.
I want my £1m++++ to buy me an income, I’m not too fussed that it is guaranteed, I’ll take some chances, but I want to know what the income is targeted as doing to my financial well-being. That is me being responsible to myself and my loved ones and it has been part of my financial planning for the past 30+ years.
I really resent David Cameron and George Osborne pretending they have released pensions from some kind of bondage and that in appointing Ros and funding Pension Wise, hard working people like me should be grateful.
I am extremely ungrateful for the triple cut in my lifetime allowance. I see no reason why high earners should have their means to catch up on pension planning curtailed to pay for an inheritance tax cut for those with housing wealth.
As a financial adviser (15 years ) and a financial educator (15+ years) I have taught the virtue of saving 10% + of income over a working lifetime to secure financial security in retirement. I have reminded people that you cannot buy a sausage with a brick from your house and warned against the dangers of relying on bricks and mortar to fund old age.]
Every single one of these messages is being undermined by this Tory Government and their miserable and impoverishing 2015 manifesto. Wheeling Ros out to legitimise their personal finance agenda is personally offensive. Ros has gone on record stating that the LTA should be scrapped, so has that other great campaigner Steve Webb.
We need to restore confidence in pensions and every time politicians tweak the dial on the retrospective tax treatment of our savings, another tranche of savers walk away muttering the words “I told you so”.
Here are five unexpected consequences of the changes on Lifetime and Annual allowances being proposed by the department of Pension Irresponsibility (and the Conservative Party).
- The messaging of the past thirty years is trashed, people will now be told to undo what they were doing – the credibility of the prudent advice (and advisers) is shot.
- Many people will unwittingly pay 55% tax on a proportion of their savings, many due to auto-enrolment which they will not know to opt-out of.
- Employers and trustees wishing to help employees manage their finances will have to revise communications, withdraw previous instructions and will see their programs devalued.
- The hideous complexities of mixed pension benefits, especially money purchase schemes with guarantees will now need to be explained and valued at enormous expense. One scheme I deal with has 14,000 members in a scheme with a GMP underpin that is biting.
- While large employers re-enroll, small employers enroll, we grapple with the complexities of DB to DC transfers, people try to work out what pension freedoms mean….. the tinkering on these taxes makes everything worse.
Andrew Neal is a man of good sense. He is an expert political commentator and a man who understands personal finances. He told me and those around me that he would not recommend to his friends and families that they saved for their retirement in a pension because pensions were too vulnerable to political interference. He said this after the 2015 budget and I suspect he would say it louder since the fiddling with the annual allowance announced this week.
I am not for the establishment of an independent pensions comission, we had one before under Hutton and it was toothless and bureaucratic and it slowed things down.
I am pro a consumer champion and pro Ros Altmann- though I hate the political nature of her appointment.
But most of all I am pro-democracy and the voice of the people. So if you have read this article and agreed with me, I’d like you to do something, I’d like you to send an email to firstname.lastname@example.org with the title
Ros – for the sake of hardworking people – tell David and George to scrap the LifeTime Allowance.