So now we have the real pension projections, which will make the hill
look steeper and the accumulated funds look smaller. If the powers
that be really believe this is going to be an incentive to the
majority to increase their savings efforts, then they really are as
stupid as we fear.
I wonder if, in formulating their policies, they make use of a
psychologist? Those of us at the coalface well know that if a client
sees his savings shrinking or improving imperceptibly, it is not
much of an incentive for him to add more of his hard-earned money.
However, when he sees things doing well and profits accumulating,
there is no better incentive for him to continue to make an effort.
This, of course, includes the great incentive of tax relief.
Good money has been spent on research telling us the obvious – that
people spend more money in the pub than they do on pensions and
savings – you don't say.
In today's environment, if somebody makes the effort and saves as
much as, say, £2,000 a year, how much would he make on this if
he put it in the bank or the building society? About £50 over
the year if he is lucky and is a standard-rate taxpayer.
The current inflation figure is above that so he might as well buy
the new car, the new washing machine, have the house painted or go on
a good holiday before the price goes up. Apart from anything else, he
can enjoy it now. What's the point of making the sacrifice for
Invest it in an Isa? Great idea when the tax breaks are being watered
down. Perhaps insurance bonds? Oh, you are getting rid of the 5 per
cent rule. Pensions perhaps? But the funds are taxed.
As long as our Government, its predecessors and probably its
successors insist on calling part of our tax National Insurance,
people will still believe that the state will provide a pension.
After all, that is what they are paying for.
They will also still believe there is a National Health Service that
will look after their every ailment and that critical illness,
permanent health and private medical insurance are the preserve of
the very wealthy as, after all, National Insurance is what they pay
for and that is what they are going to get. Isn't it?
Of course, at the same time it is good Government policy to try and
ensure that the number of IFAs shrinks as quickly as possible just to
make sure that nobody can get impartial advice and that the buying
public are kept in the dark as much as possible.
Sandler the Destroyer is now promoting education in financial
services when, of course, even according to Patricia Hewitt, 50 per
cent of the population do not know what 50 per cent means and the UK
still remains probably the most innumerate and illiterate society
within the G7.
But no doubt these newly educated savers and investors are going to
understand all about tax, will be able to complete their
self-assessment forms with ease and understand all the basics of
investment and pensions because the likes of Sandler, the FSA and the
Government will ensure that, even though the majority do not know
enough geography to point to Iraq on a map, they will have a firm
grasp of the afore-mentioned topics.
At least travel will be easier as we can then all fly away with the
birdies and visit their cloud cuckoo land.
Harry Katz Norwest Consultants,Stanmore,Essex