Apart from giving journalists a story in a quiet month, the pre-Budget rumour round is an opportunity for all the wealth management CEOs to have a moan. I think this is childish, this is why!
Of course tax-free cash is something that sells pensions to the wealthy and it’s something that wealth managers don’t want their clients taking. Come to think of it, if I was a wealth manager being rewarded by fees by the pounds in the pot, any withdrawals would be a bit of a blow. No wonder they are all worried about the inheritance tax that will be payable if clients die with the pot intact.
So the wealthy who are once again taking their pots – do so against the advice of executives wishing the pots to remain intact.
To maximise the impact of their challenge , the executives are ganging up on the new Chancellor, James Healey
The chief executives of insurer Royal London and wealth manager Quilter, and policy officials at Britain’s biggest investment platforms, have warned that the government needs to quash speculation that the tax-free cash pension allowance could be cut in the next Budget, scheduled for October 28.
There must be people in Government leaking that Healey has picked up the baton from Rachel Reeves.
“The last couple of Budgets we’ve seen . . . scare stories about the tax-free lump sum, which resulted in people doing things to their pension that they wished they hadn’t,” said Barry O’Dwyer, chief executive of Royal London.
I assume that the scare stories are propagated by Tom McPhail and the Pension Plowman. I took my cash the first time around and paid off my mortgage. It seemed a rather better thing to do , especially as HSBC had required me to cease borrowing when I was 65. When I took my mortgage out , HSBC told me they’d only lend to my state pension age which they insisted was 65. I told them my SPA was 67 but the nice man at the bank reminded me that I could use my pension to pay off my mortgage and I took his advice.
The fact’s that tax free cash is one of the few about pensions we know about. For all of us who have pots , it’s 25%. For those who are drawing Defined Benefit pensions, it is a formula based on actuarial factors which is supposed to be equivalent.
I didn’t take any tax free cash from my DB plan because I didn’t need the cash when I was 55. Ten years later, I’m very glad to have an inflation linked income instead. We ought to have lessons about what cash to take from the pot and pension and when. It being “tax-free” was not the big driver for me – cashflow was!
Until we get education about cashflow, complex stuff should be what financial advisors explain. I expect the good ones do and the bad ones show clients articles in the Financial Times to validate their advice that the money stay under management. It doesn’t half keep the fees down! For those who don’t get advice, “taking the cash” when you need it is my advice! You can take the cash at any time after 55 and that goes up to 57 after April 2028.
But anyway, I’m in the dog-house for going on about the importance from pensions of the wage in retirement . My ideas that pensions are paid by pension plans and not by annuities or by flex and fix deferred annuities are not going down well with my friends who market and manage SIPPS. They aren’t going down well at all.
I don’t suppose my tax-free cash raid on the money in my DC workplace pension could be seen as responsible no matter how much I argue it was. I was told before the inheritance tax legislation came in that I was heartless for spending my pot when it could have been an insurance for my family, I hope to prove even more irresponsible by purchasing pension from the CDC workplace pension I intend to set up and participate in.
I really am a nightmare caring more about pensions than a pot of wealth, but there’s no persuading me.
I’ve got pension pot to pay me a pension and it will. I find this pot business a bit childish, I want to get out of my nappies!
