Just as Wallace takes a simplistic approach to Gromit, offering him “more cheese”, as if that is the solution to everything, Wallace’s lookalike, one Ed Milliband, took the same approach to pensions.
Now forgive me but I thought the key task was to encourage people to save. Telling them that all pensions are bad is not a smart way to achieve that.
It is true that some plans were poor-value, particularly those sold in the Seventies and Eighties. Current options are in the main good value and offer a far wider investment choice and even accommodate Sharia-compliant and ethical investments in way that was not possible in the past.
We hear endless chatter about how corporate wrap is the solution but I wonder could it just as easily add to the problem.
I recall a friend whose father had told him when you do not know what to do, it is time to do nothing. Not the most strategic of approaches but certainly a cautious one and, if time was elastic, then it may well be the one to select.
But the time available to save is not elastic as people have a wish to stop working or slow down and often have a date or age in mind. The challenge for all is to encourage and evolve a savings culture. To do this, we need joined-up thinking involving the Department for Work and Pensions, The Treasury, HMRC and the industry.
I suggest politicians are deliberately excluded, partly due to their track record to date, irrespective of the party, but mainly because they focus is on the short term as it aligns with their term of office.
We need a long-term strategy that is ringfenced from political interference.
One option could be the loss or reduction of higher-rate relief but surely linking corporate tax relief to business owners making meaningful contributions to pensions would be better? Those sticking to the obligatory Nest level of contributions should receive no tax relief and only those who pay more get the relief and if that relief was dynamic, we could start to see firms seeing pensions as a tax break and not a burden.
Making it easier to move into an Isa and out of pension and vice versa is also essential. The current farce, ignored by Mark Hoban, who sees soundbites as more important than strategy, of the inability to transfer from child trust accounts to junior Isas simply underlines why politicians should not be allowed to determine such crucial options.
The National Association of Pension Funds’s role in this debacle deserves a special mention here. We have DC schemes operated by NAPF members, where early leavers received certificates of value that would ultimately disappoint as charges for employer and employee were applied in some perverse form of clawback. Just one example that proves that the employer-sponsored schemes can deliver bad value too.
Focusing on dubious research, where extrapolation of data is commonplace and the sample tiny, does not promote the savings culture we need. It is time for grown-up messages.
Robert Reid is managing director of Syndaxi Chartered Financial Planners