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Labour cops out on pensions crisis

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In what is probably its last chance to create positive momentum before the election, the Government has once again ducked the fundamental issues behind the pensions crisis in favour of the usual short-term political fudge.

Delaying personal accounts gives out precisely the wrong signal about the importance of pensions in our society and the other minor changes continue the long history of tinkering with the pensions system purely to extract more money from those who are contributing.
 
The pensions crisis, which is evident in the rocketing cost of annuities and the collapse of final salary pensions, is a pressing financial issue for everyone.  

But the solutions aren’t just financial, they are about enabling people to come to terms with the shifting sands of retirement and pensions and sort things out for themselves.  

Instead of that, governments have consistently put barriers in the way with layer upon layer of complexity, contradictory state benefits and a failure to deliver on promised tax reliefs.
 
Just last week we commissioned a survey which revealed that 44 per cent of the population think that none of the political parties will be effective in dealing with the UK’s pensions issues.  

And through the PBR, the Government has confirmed our worst fears that no leadership will come from that direction; it’s going to be up to us as individuals.
 
We all need to update our thinking about what work means to us, whether it needs to end at an arbitrary retirement date, how we want to live a longer life, or how we optimise our existing financial arrangements, including all the bits and pieces of pensions that we all have, for the future.  

The role of professionally qualified advisers and the whole financial services industry in helping people through the pensions mire is more crucial than ever before.
 
Personal accounts have their detractors for very good reasons – but at least their early introduction would have been a clear message that pension provision is a key part of our lives.  

Instead, we have been given even more confirmation the political football has been taken home. Politicians have again copped out of the pensions issue.

And with the Government decreasing its funding for public sector pensions and in effect starting to roll back its own defined benefit scheme, it is now more than ever down to individuals, working with their advisers, to sort things out for themselves.

Brian Wood is the author of Beat the Pensions Crisis.

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Readers' comments (3)

  • I remember the Ted Heath and Harold Wilson era when exactly the same happened. Funny how things repeat themselves and the only ones that lose out are the people that put them in power in the first place.

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  • Many people are unable to fund their own pensions or have had their final salary schemes close down on them as the private sector attempts to claw back costs and liabilities.

    For a very paltry contribution (or none at all, as far as many civil servants pay nothing at all except a small widows contribution of 1.5%) Local Government and especially Civil Service employees get a gold plated index-linked, guaranteed pension, and very generous early retirement and redundancy terms, at a huge cost to the public purse.

    Pensions for the private sector are still very much the poor relative. Personal Accounts are unfortunately still not quite there I feel and maybe the money would be better spent invested into a sovereign wealth management fund as an alternative perhaps, to fill the black hole. Personal pensions could then be made much more attractive in terms of the annuity rules and access and ongoing tax breaks.

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  • Anyone who can do simple arithmetic already realises that there is no benefit (tax-wise) for basic rate tax payers to commit money to a personal pension. If the value of their pension 'pot' rises in real terms over many years then government will (on average) claw back a lot more tax than they ever forsook in the first place - even ignoring the benefits 'trap'.

    Then there is the annuity risk - not having a clue what annuity rates might be in the future. Even now the insurance companies are offering rates that barely give back the purchase price of the annuity to the client who lives until average life expectancy. So, on the one hand we have government ripping off people saving for retirement (with the lie about tax relief) and at retirement, the life offices offer a product with virtually no actual investment return (annuities).

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