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George Osborne is losing the plot on pension freedoms


Chancellor George Osborne pulled a political masterstroke with his Budget bombshell on pensions flexibility.

He left Labour dumbfounded, Ukip on the back foot and the industry struggling to contain the market fallout.

But that intoxicating feeling of success has gripped the Chancellor ever since and he has become obsessed with handing out pensioner goodies.

Osborne’s tone has become increasingly complacent on consulting or examining the consequences of his pensions policies. His party’s electoral prospects have his undivided attention.

First, there was the shambolic handling of the abolition of the 55 per cent charge on pension pots upon death.

The politically-charged briefing to newspapers at the Tory conference in Birmingham was inaccurate and misleading.

It created a false market in insurer shares alongside industry chaos. Osborne rounded on the FCA for a similar botched briefing in March on a review into closed-book funds.

As Money Marketing head of news Tom Selby explains the fact the Treasury has refused to launch an investigation into itself after demanding one at the FCA is bare-faced hypocrisy.

Secondly, Osborne promised to offer everyone over 55 free, impartial, face-to-face advice as a way of ensuring people can make informed retirement choices.

This monumental undertaking was thrown out as a key protection with few details. Last month the Treasury said there would be more details published “shortly” but we are still none the wiser.

The Pensions Advisory Service and Money Advice Service have been given scant information to make progress, including hiring new staff.

The first guidance pilot led by Legal & General showed shocking take-up figures of just 2.5 per cent. Experts warned this would be a “car crash” leaving the vast majority of people with no help from next April.

Hundreds of thousands of retirees will be plunged into an unregulated wild west of “innovative” financial products with no help, as well being forced to fend off beguiling unregulated financial con men.

The Treasury has no answers on how to drastically increase engagement. There are just six months until launch date.

Thirdly, there is the increasingly racy language from the Treasury. Since the freedoms have been announced the Government has said you can spend your pot on Lamborghinis, holidays, a stable retirement income, care costs, pay off your mortgage or now even a bank account.

The average pension pot is £28,000, according to MAS. There is a dangerous fantasy being pushed by the Treasury that this reform is the answer to everyone’s money problems.

The Association of British Insurers has strongly hit back against the increasing focus on early access to pension as potentially threatening the entire reforms.

Of course, auto-enrolment will see the average pot rise in the next 20 years and beyond but for now, pots are relatively small.

This reckless language is driven by political realities: we have a general election next year and the Tories are terrified about Ukip.

As Ukip rises and rises, Osborne pushes increasingly frantic pre-election bribes to the tens of millions of over 55s, believing there is a policy solution to bringing back Ukip voters.

Labour is unwilling to make a real fist of holding the Government to account either because it agrees with the changes or it is fearful of their electoral potency.

With the Taxation of Pensions Bill, published yesterday, making its way through parliament, there are plenty more opportunities for legislative hand outs to pensioners.

There is a worrying pattern that Osborne says something crucial on pensions riddled with technical inaccuracies, problems or hyperbole, then walks away. It does not bode well for next year.

Samuel Dale is politics reporter at Money Marketing 


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Incompetent Regulators 15th October 2014 at 2:41 pm

    We needed a shake up in pensions as they have been bad news for too long and annuities are rubbish. Even Ros Altmann said “one has to live to 100 to get their money back”!

    Call me a cynic, but the likes of insurers, industry people saying the oldies will blow their money is a nonsense. Are they wanting to keep the money in the pension pots so they can keep feeding off the AMCs?

    Big pots will BE TAXED heavily on withdrawals over and above 25% TFC and small pots are ineffective income wise. Passing onto children free of tax on death is something I have advocated for years, this cuts the potential benefits bill too. I have heard so many so called ‘experts’ talking rubbish that I am getting fed up with all the speculation. What these so called experts haven’t twigged is if that someone takes their money out HOW MUCH TAX WILL THE TREASURY PICK UP? LOADS OF MONEY! And so what if people want to take their money out, it’s theirs anyway. Part of the solution would be to cut benefits to the scroungers and those who haven’t put money into the system. And then they may start saving. How come the Chinese population saves a greater percentage of their net spendable income than the UK? Because they know theirs no benefit system. That’s why immigration is high on the list now.

  2. Christine Brightwell 15th October 2014 at 5:02 pm

    I agree that changes we needed, but Sam is right. More haste less speed as my mother drummed into me as a child. A bit of thought and proper advice would have helped enormously before the fragrant George announced random changes to the taxation of pensions and shouting about free advice for all.

  3. I agree Christine -My Sargeant drummed in to me Prior Preparation and planning prevents p*ss poor performance.

  4. Christine Brightwell 16th October 2014 at 8:33 am

    Philip – we called that Peter the sixth!

  5. These are politicians and it has always been the same. They come out with ideas and then leave the practicalities until later for others to sort out – it will never change, so lets move on.

    The more I read the emotive headlines the more I believe that in this country we have a propensity to whinge, pick fault and moan at change. These a very positive changes for both individuals and pensions, which are long overdue. In the industry we need to get on and deal with it, as there is a lot to do. More action and less pandering to the pessimistic, doom and gloom whingers!

  6. Christine Brightwell 16th October 2014 at 11:08 am

    I do think the changes are mostly positive, but I also believe it is useful to learn how to steer before setting off down the road and promising not to hit anything. Hard cases and hasty changes make bad law – what we need is positivity AND thoughtfulness.

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