I’m as free as a bird can be when “freedom” is defined and confined by HMRC.
“Me” as case study;
I have a pension pot which wealth managers call “big” but can only supply me with an income of £15,000 pa – not enough to keep me and my family and boats.
If I were to start the glide path to retirement and say work four days a week, I could start drawing down now (I am 55). But I am still building my pot and to take any money from it, I would have to limit my contributions to £4,000 pa (or pay back the tax).
I have a generous employer who pays more than £4,000 pa into my pension.
The idea of being “free as a bird” is relative. I am free to enjoy the idea of freedom, but exercising those freedoms would bring a load of regrets, negotiations with my employer and general discontent.
So I am reading with a jaundiced eye an update from the Treasury that showed that 162,000 individuals took cash from their pension pots in the last quarter of 2016, up from 158,000 in the previous quarter.
That in total £1.56bn was released in Q4 of 2016, slightly up on £1.54bn in Q3.
That £9.2bn of pension cash had been released by half a million individuals since rules were eased in April 2015.
And I gritted my teeth to read the Treasury’ Simon Kirby boast
“Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do, these figures show that people continue to take advantage of the choices on offer.”
All the Treasury is giving me – is a headache!
As with my lifetime allowance calculations, my tapering annual allowance and my progressive income tax, my pension planning , which involves me reducing a sum of money from my employer each month, has become a constant source of bemusement!
I am quite happy to pay tax – when I have to.
But when there is an opportunity to maximise the tax-effeciency of how I get paid, there is that little demon in me which says –
“I want to do what’s best for me and my retirement”.
I’m as free as a budgie in a cage and I don’t appreciate a Treasury Minister accruing his defined benefit telling me that I can “take advantage of the choices on offer”.
It’s back to the drawing board. The reduction of the annual allowance from £10,000 to £4,000 in April means I will not be drawing on my pot, I won’t be working four days a week, I will be doing exactly what I planned to do before all this hullabaloo about pension freedoms started.
Man is born free and everywhere he is in chains, budgies are as free as the cages you perch them in. Frankly the manacles are (to coin William Blake’s phrase) “mind-forged” but once you set out , to be shoved back in the cage is a pisser!
I’m lucky enough to know the rules and not to have cyrstallised any part of my DC pot. I wonder how many of the 162,000 people who did raid their pot last quarter will live to regret it.