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Retirement Radio: Simplify pensions, save billions – but can we trust future politicians?

George Osborne’s budget took many ideas from the brain of economist Michael Johnson, this month’s guest on Retirement Radio. But pensions guru Steve Bee has some questions. 

 
Retirement Radio: Simplify pensions, save billions – but can we trust future politicians?

George Osborne’s budget took many ideas from the brain of economist Michael Johnson, this month’s guest on Retirement Radio. But pensions guru Steve Bee has some questions.

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The Centre for Policy Studies, the think tank co-founded by Margaret Thatcher, recently published a paper (download the PDF) on pensions reform by Michael Johnson, a research fellow at the Centre.

Johnson argues the country can save £8.5 billion a year by changing the rules around pensions tax treatment – in particular by slashing tax relief for higher rate taxpayers.

Parts of the research were echoed in Osborne’s June budget, and many of Johnson’s proposals – such as eliminating the distinction between pension and ISA saving – are actively being discussed in the corridors of power.

But Steve Bee, Citywire columnist and the brains behind jargonfreepensions.co.uk, has reservations about trusting a future Chancellor not to renege on deals made today between government and citizen - particularly giving up tax relief on contributions now in exchange for a better deal later.

As Bee puts it, the main feature of our pensions system appears to be that it is subject to 'constant change'.

7 comments so far. Why not have your say?

CTWO

Aug 31, 2010 at 12:46

Surely a viable pensions regime can't be beyond the wit of man (or woman) to devise? You have to start from some basic premises. First, the state can't now, and won't in future be able to provide a decent pension for anyone. Second, demographics means that each of us needs to put by more, not less for our retirement. Third, it needs in some way to be linked to care, since many of us will likely spend some of that retirement needing care. And finally, we really need to be incentivised now to make provision; hold that expensive holiday, put a few quid into my pension pot.

Over to you, George.

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John Wardle

Aug 31, 2010 at 14:03

So the process of destroying the pension system continues. Yes lets reduce the tax relief for high earners, theres so few of them it does not really matter anymore, and, of course, over compensated Civil Servants make little or no contributions so their fantastic schemes so they will be unnaffected!

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Keith Snell

Aug 31, 2010 at 14:57

The first pension provision in need of reform is civil service pensions and those related to it such as MPs pensions. What we do not need is higher rate tax payers having the tax incentive to save in pensions removed. I say this as a pensioner who had no trust whatever that any party would stick to what they say, history suggests very clearly that our political classes are untrustworthy, that surely is why we have a coalition government, however we will have to see if they have got the message, I doubt they can reform themselves which is what is needed.

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Anonymous 1 needed this 'off the record'

Sep 01, 2010 at 02:33

Classic example: Keydata

Saved into a pension pot all our lives. Some others for their care home fees.

Aged 65 went to IFA, recomended SECURE Income Plan in UK FSA Regulated

Company.

Checked with FSA (Gov appointed) = gold stars all round.

Now no one wants to know.

Present Gov: 'Didn't happen on their watch'.

FSA: Invested off shore? Lifemark? We never heard of them.

Treasury: FSA dealing with matter. (Plus no interest on savings!)

Company: closed due to unsettled TAx bill

HMRC: no tax rebate

IFA's: Nothing to do with us.

MP's: on holiday? Wait until September.

So where is the incentive going to come from, my friends.

What I say.... is never let your pension pot out of your sight into any kind of government control, now or in the future.

So many rules were changed by Gov. during our lifetime and even at the end our pension was raided by GB.

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snoekie

Sep 01, 2010 at 17:18

As commented elsewhere, all need to make their contribution to the pots, and that includes govts foregoing tax on the pension savings for people working and perhaps even pensioners to allow them to add to their assets whilst they are doing bit jobs to bolster their income by allowing investment with tax only being paid on what they draw down, with limits to prevent the better off capitalising by building up fabulous pots for their heirs from income they don't need.

Tax exemption to pots below, say £750k. Here I mean income to the assets earned by the pots, not draw down.

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S M

Sep 01, 2010 at 17:46

Why are Governments so hell bent on damaging the pensions of people?

I am approaching retirement and every time I think I have a viable plan the Government changes things.

They hit the people who actually have the behaviours that are required. Namely planning for their own future. They will be less of a burden on all the other taxpayers.

Government spends too much time taking money out of hard working peoples pocket to waste. Spend a bit of time promoting the behaviours required

Get off our backs!!

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snoekie

Sep 01, 2010 at 21:06

S M, AMEN!

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