EDITOR'S LETTERJohn Stepek
The pensions playground
I’m starting to wonder if one of George Osborne’s ex-girlfriends ran off with an actuary. There has to be an explanation for why the chancellor seems to want single-handedly to destroy the annuities industry.
As the Taxation of Pensions Bill, published this week, shows, Osborne’s not taking any prisoners with his pensions revolution. You’re going to be able to take your 25% tax-free cash out of your pension in dribs and drabs rather than as a lump sum.
You’re going to be able to pass it on to your family if you die without spending the lot. And despite the protests of various financial lobbyists, this all makes the prospect of annuities in their current form extremely unappealing.
To be clear, we think these changes are great news. We’re not entirely sure about
the convoluted methods of turning pensions into an inheritance-tax-avoidance vehicle. But the overall gist – that people should have more flexibility and freedom to prepare for and manage their own retirement – is a good thing.
And it certainly makes the decision on whether to save in a pension or an individual savings account (Isa) a lot trickier. As Hargreaves Lansdown points out, since the new rules were announced in March, self-invested personal pensions (Sipps) have attracted an extra £116m in funds, compared to the same time period last year.
But there’s one very significant problem with pensions that won’t ever change. And that’s political risk.
• Read the full editor’s letter here: The pensions playground