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Pension purgatory

The trouble with most decisions made by those who have gained political power and, almost by definition, have lost touch with reality as a result, is the resultant law of unintended consequences.

Over the years I have tried to get inside the heads of these people to try and fathom why on earth they do what they do. This is not due to some altruistic leaning of mine but more to do with keeping myself sane in the face of actions which, at times, seem to border on the deranged.

A good example of this is the recent Budget lunacy. There are commentators who have suggested the measures will have a negligible positive increase in HMRC revenue. I must admit to glazing over at such pronouncements, more out of wonderment than boredom. How do these people calculate this sort of thing? At least I am honest enough to admit I have no idea.

However, I do know for sure what a negative impact this will have on pension provision, particularly with employer-sponsored schemes. When you demoralise the bosses, everyone else suffers as a result. Uncertainty as to the viability of their own long-term pension savings is bound to filter down through the ranks of their staff.

Darling and Brown have over-reacted in the dying days of their regime and grabbed at an absolutely crass and pointless effort to increase tax-take. The unintended consequence is not an increase in revenue for the taxman – or a vote-winning gambit – but a slow and painful erosion of confidence from the top down.

The Budget won’t kill off the pension system overnight. Rather, it will add yet further slashes to a death by a thousand cuts. Either you believe in pensions or you don’t, and someone in power has to make a decision either way.

Pension simplification was a stroke of genius. All we need to do now is keep on that track and unwind the recent Budget.

There are several reasons why people don’t sign up to a pension when it is pretty clear they should, the main ones being apathy, cost and complexity. With pension simplification hot on the heels of stakeholder, we had a firm base from which to move forward, and real progress with consumers was being made.

In one fell swoop we are back to where we left off. Personally, I don’t mind if politicians kill off pensions as people will always want financial advice. But please, let’s move away from this state of purgatory and make a decision once and for all – for better or worse – and then leave well alone for a generation or two.

Tom Kean is director at Thameside

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