It’s
fair to say that our pensions are a political football. In return for the
generous tax relief we receive on the way in (getting less generous with each
passing budget) politicians believe they have carte blanche to meddle.
Moan
we must not as pension savers and persevere regardless. Kicked are we……by
Labour, the Coalition Government and now the Conservatives……who are launching a
consultation on the future of tax relief. It could well go altogether. I
wouldn’t be surprised.
Of
course, political meddling is occasionally effective in the long-term savings
market as it has been with ISA’s. These savings / investment vehicles, after a
long gestation period, are now just about fit for purpose. Just a shame it took
16 years to get there!
ISA’s
are more user-friendly than ever……higher annual allowances than ever before……a
great tax shelter that can enable you and your children to build a meaningful
tax-free pot. I guess it should be a ‘thank you’ to George Osborne if I wasn’t
so suspicious that it was all simply a vote winning exercise!
Yet
not so much ease to cheer in pensions. Every time politicians interfere, they
bring more complexity into an already fiendishly complicated savings regime,
usually chipping away at the tax breaks in the process. That leaves the general
public scratching their heads in bewilderment and running for the hills
screaming ‘pensions, bloody pensions’……again!
One
of the crassest bits of meddling is the latest reduction in the lifetime
allowance, from £1.25 million to £1 million (effective from April 2016). It is
nonsensical at best and spiteful at worst. It discourages successful management
of your pension. The existence of this allowance brings a big chunk of doubt
into pension planning. Will I hit the lifetime allowance? Will I not? Should I
stop saving into a pension? Should I be doing something about it? It destroys
confidence in pensions to deliver a meaningful income in retirement……and let’s
face it, confidence is far from high as it is.
So
there you go……yet more meddling of pensions politically. I think we can pretty
much guarantee that it won’t stop here either!
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