As part of a Government push to promote pension reforms, Prime Minister David Cameron has today written for MoneySavingExpert.com.
It is quite a coup for Martin Lewis and his team and an article that any media outlet would have published, including us.
The only problem: it’s nonsense. It’s riddled with spin, half-truths and omissions.
Cameron says he is writing to “explain” how pension reforms are affecting people but instead, according to industry experts, paints a “misleading” and “disingenuous” picture.
There are massive changes to state pensions, taxation and flexibility of pots being pushed through by this Government but Cameron does not do a good job of explaining it.
Firstly, Cameron says he is abolishing the “completely unfair” 55 per cent death tax on pension funds.
But he introduced the tax in April 2011 when he extended drawdown rights to the over-75s.
The tax rate was 82 per cent before April 2011 – 70 per cent on the pension plus 12 per cent inheritance tax.
But Cameron could have abolished it completely in 2011 if it is “completely unfair”. It only raised £150m a year at 55 per cent. Industry experts say he is being “disingenuous”.
Cameron also writes: “When you pass away, you will be able to pass your private pension onto your loved ones tax-free.”
But this does not include most annuities and assumes most people will have money left in their pots at the end of their life. Beneficiaries will also be liable for income tax on any withdrawals they make if the person died over 75, around 90 per cent of individuals.
MGM Advantage pensions technical director Andrew Tully says: “The way it is written it sounds like everyone will be able to pass their pot on tax-free. Is it completely wrong? No but you could argue it is quite misleading. Pension pots will be taxed at marginal rates in the hands of beneficiaries.”
This is spin.
Secondly, Cameron says he is “scrapping compulsory annuities” – but annuities have not been compulsory for the under-75s since 1995 and the over-75s since 2006.
Clearly the reforms next year are extremely radical and Cameron deserves credit for his boldness but they should be explained better than this.
Mind you, Prudential – in its interim management statement, no less – made the same howler this week too.
This is a half-truth.
Thirdly, there is no mention of the pensions guidance regime being introduced next April. None at all.
A Legal & General pilot shows just 2.5 per cent take-up of guidance despite the Treasury making it an essential protection for the new world of freedom.
Cameron also fails to mention any of the risks of managing drawdown or the role of regulated advice and new products.
These are big omissions.
Cameron has form in writing inaccurate consumer articles on financial services. Last year, he wrote for the Sun on Help to Buy but Money Marketing was on hand to point out the error of his ways.
There is no chance this pensions article would pass the test to become one of MoneySavingExpert.com’s excellent guides on financial services.
Samuel Dale is politics reporter at Money Marketing