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.