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Ex-Bank boss calls on Govt to put pensions before Brexit

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Former Bank of England governor Lord Mervyn King says politicians are obsessed with Brexit to the detriment of more fundamental issues such as pension saving and long-term care.

Speaking on BBC’s Newsnight programme last night, Lord King said there was a risk “big questions” will not be addressed if the sole focus is the UK’s withdrawal from the EU.

He said: “My biggest worry about economic policy in the next few years is that all the politicians seem obsessed with Brexit.

“And actually, the biggest problems we face now are not Brexit, it’s about how we can reduce the trade deficit, how we’re going to save enough as a nation to pay for our pensions… how we’re going to save enough to pay for care for the elderly… how we are going to finance the NHS.”

He added if politicians only focused on Brexit over the next two or three years, “then those big questions will not receive the attention which they deserve”.

On the issue of Scottish independence, Lord King said the challenge was less about currency, and more to do with public finances.

He said: “It has… the people, it has a capital city, a history and culture, it could be an independent country. The question is, does it want to be given the consequences of it?

“And if the oil price remains low and if they lose the money which is transferred from the rest of the UK to Scotland, then they would have to make that up in their own budget, but that’s a consequence of deciding to be financially independent, you end up paying for yourself.

“And it would be a challenge to borrow on the international market if Scotland decided to run a large budget deficit. I think that would be expensive, the interest rate would go up.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Meanwhile there are mumblings about tampering with pension tax relief. If this does happen one might reasonably ask why bother with pensions at all when ISAs are the obvious alternative.

    What this would do to the few remaining life offices that offer pensions and the newcomers who hitched their wagon to the prospect of riches via AE remains to be seen.

    • It is inevitable that we will move at some point to a flat rate of pension tax relief because the bulk of the “cost” of the relief is taken up by higher rate tax payers – they will ignore the deferred pay argument. Once that has been established they will then look to move away from front end relief to a bonus system similar to Lifetime ISAs, which will then sound the death knell of pensions as we know it. You can see the attraction though, as in the short term before those unfunded bonuses are due to be paid, the government of the day will pocket some £25Bn a year in unpaid tax relief – what’s not to like as a politician? The argument will be that we will still receive the relief (although it can obviously be tinkered with in the future), it will just be paid when we draw our pensions and not when making contributions.

      • John Middlemast 21st March 2017 at 4:31 pm

        I agree with you on the likelihood of moving to a flat rate of pension tax relief …but I think the tinkering is more likely to centre around the LTA , contribution restrictions and other tax efficient alternatives eg VCT /EIS .
        Some of our recent history with ‘commendable ideas ‘ …like the CTF is that they get’ kicked in to touch ‘ when the going gets tough .It wouldn’t surprise me if the same thing happens with a future government’s commitment (or lack of it !! ) to the funding of the LISA

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