Folly of granting total pension freedom is now becoming all too clear
This is Frank Field’s letter to the FT , published October 28th. In the context of the Work and Pension Select Committee’s current examination of pension freedoms, it needs to be read.
It is for the reasons highlighted by Josephine Cumbo that the government needs to reform the pension freedoms regime (“UK retirees using ‘pension freedoms’ for alcohol and gambling”, October 23).
Since the very outset of this debate, when mainstream political opinion was opposed to the idea, I have always been in favour of pension freedoms as an alternative to historically poor annuity deals. The key proviso for which I pushed then and have always done since was a requirement for people before gaining total freedom to have sufficient capital to prevent them falling back on welfare.
The coalition government opted for total freedom without this proviso and we are now beginning to see the results — people are spending all of their savings.These citizens are having their cake and eating it. As well as being offered tax breaks to build up their pension capital, people are also able to fall back on welfare once they have spent their savings.
Clearly the government will need to revisit this aspect of what remains overall an attractive policy, to prevent the possibility of taxpayers coming to think they are getting a raw deal.
Frank Field MP, Labour, Birkenhead,House of Commons, UK
I have three thoughts;
I think it unlikely that Frank Field wouldn’t have foreseen “double dipping” as a consequence of pension freedoms – it is an easy moral hazard to understand – it needs only common sense.
It is sensible (of him) not to throw the baby out with the bathwater, we need to retain pension freedoms while building a framework that makes it easy for ordinary people to retain a wage for life from their pension savings.
The letter looks positioned and – significantly – Frank Field signs off as a Labour MP. I am quite sure that this letter will receive support from all quarters of the House of Commons but particular approval from the Labour party, which is the only party currently looking at how we can spend (as well as save) our pension savings.