In May 2015, when Ros Altmann replaced Steve Webb as pensions minister, I made a prediction that this was the beginning of the end for pensions as we knew them, to be replaced by a different form of “long-term savings”.
While my anticipated timescales may have been off, I am still unshaken in my belief that the current government do not wish pensions to continue in their current form.
With hindsight, the wish to gain support from the backbench made 2016 a bad time to stir-up a politically sensitive topic. But now, in the light of the EU referendum result, the gloves are off and, of course, everything is the fault of the Brexiteers.
Altmann herself highlighted how, in the Treasury’s “Ways to save in 2017” infographic issued last week, pensions were conspicuously absent. The document highlighted the benefits of six different flavours of Isa, premium bonds, the all-but-dead Child Trust Fund and nothing else. It’s hard to see that this snub was anything other than deliberate.
Personally I favour simplification and with current potential uncertainty as the government mull their options with respect to Article 50 there could yet be a significant positive outcome: a tearing up of the current tax regime, including the incentives applicable to long-term savings.
What future for pensions?
The problem with the historic rules, and each subsequent change, is a wish to maintain cost neutrality, yet also to ensure no-one (or at least no-one who is likely to vote) is worse off. In the current climate fewer people expect to be better off, and simplification of every tax – including stealth taxes like national insurance, and the infernal tapering of nil rate bands, personal and pension allowances etc. – could reduce avoidance, complexity and actually increase tax take disproportionately to the load placed on the taxpayer overall.
If this means we cannot afford pensions, then let us at least have something that is stable. Apparently people dislike pensions because they are complex and like Isas because they are simple. The last ten years of government are to blame with the first problem and it seems the current government are doing all they can to minimise the attractiveness of the second.
I do not profess it would be painless or simple, but this current government have a window of opportunity of only a few months to put their heads together with the Office of Tax Simplification and come up with a framework that could provide a lasting legacy of simpler, fairer tax alongside a robust system of tax-privileged long-term savings.
Alistair Cunningham is a chartered financial planner at Wingate Financial Planning