It is incredible to think the coalition Government is looking to introduce a policy that even the LibDems claimed was unaffordable before the general election. However, if the Government follows through with its proposals for a £140 flat-rate pension, it will be a massive boost to pension saving.
The interaction with state benefits was a huge shadow hanging over the introduction of Nest and it is highly likely that the scheme would have been under-mined by negative publicity surrounding this issue.
Pensions minister Steve Webb must be congratulated for persuading the Government that the huge benefits of a higher state pension are worth the huge costs involved. When Webb was appointed, we were quick to jump on strong statements he made in opposition suggesting the need for a higher and simpler state pension as the bedrock to all other reforms.
Many in the industry, including myself, were cynical that Webb had any chance of getting the coalition to support a citizens’ pension and believed the best he could hope for was to have the plans added as a future aspiration. I’m glad it looks like I have been proved wrong.
The Treasury reforms to pension tax relief are also a positive move. The £50,000 allowance is higher than we were expecting and offering relief at the highest marginal rate retains an important principle while removing another layer of complexity.
We await a Government response to its consultation on annuitisation changes. In this month’s issue of Retirement Strategy, Suffolk Life director of marketing John Moret warns the new flexible drawdown regime could place severe pressure on providers and advisers and suggests a delay may be required.
This month’s Retirement Strategy cover star Malcolm McLean has spent the last few weeks hopping between TV studios to explain pension changes. His new role at Barnett Waddingham is all about media exposure and the 50 radio and TV appearances in his first seven months suggests he is doing something right.
In the interview, McLean suggest the Government could be even more radical in its taxation reforms and questions the continuing need for National Insurance.
Elsewhere, The Retirement Partnership director Billy Burrows offers a timely warning that chasing the best rate is not the only thing to look out for when shopping around for the best annuity.
As ever, any comments or suggestions for future issues should be sent to firstname.lastname@example.org.
Paul McMillan is editor of Retirement Strategy