It seems like an age since Chancellor George Osborne announced his intentions regarding pension freedoms. News of arguably the most far-reaching and radical reform to the retirement space seen since the introduction of personal pensions blindsided his political opponents. Initially at least it earned him the exact opposite of the poor reputation Gordon Brown received with his tax raid on pension schemes.
The general feeling was that Osborne had listened to what people saving for retirement actually wanted and had delivered some much needed flexibility to those in “middle England” prudent enough to be saving hard. Citizens that were determined not to be a burden on the state were to be rewarded with real flexibility in retirement.
But what a difference a couple of years have made. Indeed, we seem to be rapidly moving from flexibility to fear. Those that have done as their social contract expected and steadily built up pension funds now find themselves in the ludicrous position of being dramatically restricted in terms of how much they can contribute on an annual basis, with some being limited to as little as £10,000 a year. As well as this, they are facing a drastically reduced lifetime allowance, falling in what seems like no time at all from a potential £1.8m to £1m.
So here we are in a ridiculous situation whereby those that have saved hard are being penalised just because they committed to building a comfortable retirement. And advisers? Well, we are now having to talk to clients about how their chosen investment strategies may lead them to breaching this lifetime allowance and being hit with punitive tax rates.
At the same time, we are talking to those who were unable to make decent contributions while they followed their entrepreneurial dreams and built their businesses. Aiming to get to their pensions later once they had profits, they are now unable to get enough in the pot as the annual allowance has become so miserly.
And then even for those not caught out by the reduction to annual or lifetime allowances, the tax relief available is now massively under threat.
While a pension fund of £1m may sound like a lot at first glance it probably actually equates to considerably less than £100 a day in retirement. And this from a Conservative Government that continually claims to be the party of aspiration.
It seems like chancellors of any political persuasion just cannot be trusted to do the right thing with our pensions. The prudent public deserves a whole lot better than this shambles hiding behind a charade of tax relief “fairness”.
There is nothing much fair here at all that I can see. I suspect Osborne may rue the day he started down this path and will end up with a reputation as bad as Gordon Brown.
Lee Robertson is chief executive at Investment Quorum