Given Australia's experience, should the new pension freedoms be reversed?
If we get to spend our heavily taxpayer-subsidised pension savings as and when we like, we have a responsibility to other taxpayers to make sure we do it right and in particular, that we don't spend it too quickly.
Are the UK's pensioners up to the job? Look to Australia, and it is hard to be sure they are.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Australians introduced reforms very similar to our new ones around 20 years ago. The result? Happy pensioners. Then broke pensioners.
The over-80s are running out of cash, their financial needs are putting an increasing burden on the state (other taxpayers), and last year the Australian government launched a consultation to see if it should reintroduce some kind of compulsory annuitisation.
Their conclusion was that, given rising longevity and the difficulty people have in planning for it, pensioners should probably be forced to use at least some of their pot to buy an annuity.
And what do the Australians think of our move to pensions freedom? "Sounds like a politician looking to be re-elected", Deloitte partner Russell Mason told a conference audience in Australia last year. It is a reasonable point.
At MoneyWeek, we are great believers in financial freedom, and we have been thrilled by the moves away from compulsory annuities. But we are also well aware of the problems exemplified by the Australian experience, and reckon there is more change to come here.
The Australian suggestion of partial annuitisation makes some sense. Perhaps everyone could be asked to annuitise their first £100,000 with the income kicking in from age 75, for example.
But there is also the question of the age at which people can access their pensions: 55 seems way too young to get your hands on money that has been topped up by the taxpayer with a view to financing your old age: who retires at 55? An extra ten years saving (and hence ten years less spending) might make all the difference in the UK.
-
Our pension system, little-changed since Roman times, needs updatingOpinion The Romans introduced pensions, and we still have a similar system now. But there is one vital difference between Roman times and now that means the system needs updating, says Merryn Somerset Webb.
-
We’re doing well on pensions – but we still need to do betterOpinion Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn Somerset Webb.
-
Older people may own their own home, but the young have better pensionsOpinion UK house prices mean owning a home remains a pipe dream for many young people, but they should have a comfortable retirement, says Merryn Somerset Webb.
-
How to avoid a miserable retirementOpinion The trouble with the UK’s private pension system, says Merryn Somerset Webb, is that it leaves most of us at the mercy of the markets. And the outlook for the markets is miserable.
-
Young investors could bet on NFTs over traditional investmentsOpinion The first batch of child trust funds and Junior Isas are maturing. But young investors could be tempted to bet their proceeds on digital baubles such as NFTs rather than rolling their money over into traditional investments
-
Negative interest rates and the end of free bank accountsOpinion Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK banking system slightly less awful, says Merryn Somerset Webb.
-
Pandemics, politicians and gold-plated pensionsAdvice As more and more people lose their jobs to the pandemic and the lockdowns imposed to deal with it, there’s one bunch of people who won’t have to worry about their future: politicians, with their generous defined-benefits pensions.
-
How the stamp duty holiday is pushing up house pricesOpinion Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.
