During the last Budget in March 2014 the Chancellor made an announcement that shook up pensions unlike any other person for nearly 100 years.
Pensions have been front page news ever since. It was expected that the attractiveness of them would send people in their droves wanting to save their hard earned cash in these wonderful products. That was before the “death-tax” coup de grace which meant that not only would you have freedom on how you receive them but your beneficiaries could even receive tax free income.
Pensions were exciting and some of us (well I did) even suggested they may be sexy for the first time. Pensions as bank accounts, pensions freedom, tax-free benefits and no more annuities!
However, it’s all gone a bit wrong. Why would that be? I think the blame lies in several places.
The Government – they believed they just by saying something would be so that a private sector pensions industry would touch their cap, mumble “yessir” and fall into line. The Government had fundamentally shaken up very old and complicated business models which weren’t likely to be ripped and re-written in a few months. The Government are now clearly annoyed and are gunning for the industry but what they can do to rewrite “unfair” contracts remains to be seen.
The Pensions Industry – The pensions industry is a like a giant tanker. It knows where it’s going (or at least where it wants to be) but any changes in direction happen very slowly and without much drama. So consultants and communications specialists have been very excited about pensions and talking to people about pensions but without the punch line (product) to discuss with them and the wind has left the sails and the tide is now coming in…
General public – Pensions suffer from being boring and complicated at the same time. This means that people will believe flashy headlines (or the image of Michael Beurk zooming about in a Mercedes on the way to his yacht) and suddenly think that pensions could be exciting, before discovering their arrangement is, one of those boring final salary pensions, or they’ve already bought an annuity or the provider hasn’t sorted out their systems yet and so pensions become boring, complicated and cumbersome…again!
Fear – Public, providers and advisers just don’t know what to do for the best. Advisers have been burnt before and are very nervous of advising individuals on the best course of action where the result could be loss of guarantees or capital with income relied upon by the state. People need protection (I believe) and we should not let people make bad decisions but this is proving a gigantic log-jam to the system.
The Press – The nature of printed media is that they want to write about bad things and this was a predictable outcome. Either way this journey goes the headlines write themselves “Pensioners in Penury as money runs out” or “Pensions in Penury and providers cling on to their cash!” I would much rather the press concentrates on unfairness and bad practice (pensions liberators) and supports people in making sound judgement.
So, the last 12 months or so feel like a gigantic missed opportunity to revamp pensions. The next 12 months need to be built upon. I just hope that George doesn’t get carried away and start another round of complication and trust eroding measures in the next budget.
We shall see.