I hope that as Jo Cumbo steps away from control of the pension brief at the FT, her content is not replaced by more of this stuff.
Firstly, let’s be clear that there are three kinds of pensions in the UK. These are state pensions, workplace and non-workplace pensions. This story is about reinvesting the state pension into a non-workplace SIPP.
It is true that many wealthy people do not need a state pension and can afford to invest it for their and their family’s future. The FT are asking if you are state pension age or older and still earning enough to live comfortably, “what should you do with your state pension, currently worth around £11,500 a year?”
The answer that the FT and the advisers they speak to come up with is that
Actually , you are likely, if you have the income to ignore your state pension, to get a lot more tax relief than that.
What better way for the wealthy , on the morning that a Labour Government returns, to taunt a new chancellor with “loadsamoney” behavior?
If you want the substantial tax-advantages SIPPs offer to be taken away, this is precisely the way to go about it.
In many other countries, including our Commonwealth partner- Australia – the state pension is means-tested. In the UK it is universal and paid to those who go to food-banks as it is to our 200 or so billionaires.
The recycling of the state pension by those who are 66 or older takes money from the public purse and uses it to mitigate later life taxes like inheritance tax.
But most chilling of all, is the assumption that a pension is now viewed as a wealth wrapper and that the state pension is a top up that can be used to boost this capital reservoir.
We badly need to take a step back and ask some fundamental questions about what the common purpose of pensions is. If “pensions” can be discussed in this way, the public will become sick of this kind of tax avoidance and demand that it is included in the tax-saving policies that prohibit the uber-rich from taking the mickey.
The Labour party have promised a fundamental review of the way that “workplace pensions” work. What is being proposed here has nothing to do with workplace pensions and everything to do with wealth preservation. That is not what tax relief is for.
There are really only two types of pension adequate and inadequate and sadly over the last 50 years the majority have proved to be the latter.
Robbing the adequate and prudent destroys faith in the whole structure and encourages apathy rather like the results of the election yesterday.
Until the U.K. learns how to grow the economic cake in line with living costs slicing the cake will be problematic. Low interest rates have allowed borrowing to consume to disguise falling productivity per capita and the failure of increasing the number of tax payers to fund income subsidies.
Labour have a tough time ahead rates of tax may not rise but tax receipts will
Well said, Henry.
ah, that didn’t take long….the start of the politics of envy…
Very interesting article, and very interesting timing.
More lazy journalism from the FT, which unfortunately and for some time now it has become widely known as the main mouthpiece for treasury / mandarins – so (and the real story here is that ) I’d read this as the start of the front on introducing means testing against those ‘rich’ people who do no need a State Pension.
Ok, if that is your politics and policy, but I just wish they’d be open about it. Please not a return to Campbell-like-spin, that done for them last time.
So, regardless that you may have contributed (more than most) to the State Pension, you’re not gonna get it.
I find a really reliable guide for trying to figure out what Govt’s will do on tax and pensions, is to have a think about the affect on the Mandarins (and HMRC officials) – they tend not to have SIPPs so they’ll be in the firing line. Most of their pensions used to fall under the old LTA, so you could see where that came from, and why it had to go. LOL
Is it true that Sir Edward Troup (adviser to Labour) had apparently on LBC floated the idea of means testing State pension ….
https://www.lbc.co.uk/news/labour-hike-inheritance-tax-adviser-admits/
The state pension suggestion is also mentioned.