Coffee House

It’s time for the state to trust adults with their own money

20 March 2014

The changes that George Osborne announced to pensions yesterday were so big that there was always going to be a backlash. Sure enough, the IFS and various others have today voiced concerns about the scheme. The essential complaint is that if you let people take charge of their own pension pots, they might spend their money too quickly.

This is an argument that George Osborne should relish taking on. Trusting people with their own money is a fundamentally Tory idea. It is also slightly absurd to suggest that people who have been diligent enough to build up a pension pot over their working life are suddenly going to become spendthrifts in retirement.

If, as I suspect we are, we’re entering an era of low interest rates — I’ll be very surprised if we see interest rates of 5 per cent this decade — then annuities simply aren’t going to give people the returns they need. So it’s sensible to allow people to diversify, to take more control of their own finances. It’s time for the state to trust adults with their own money. ​

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  • Rossspeak

    The issue is about sensible saving – whilst it is totally right to abolish the “need” to buy an annuity – the current pension drawdown rules are sensible in restricting the amount that can be withdrawn each year.
    It would have been far more sensible to develop a form of “simplified drawdown” – with the pension fund remaining on death transferable to Will beneficiaries at nominal tax rates.This would encourage pension saving during working lives.
    The current problem is that no company wants to take on current drawdown funds of less than £100,000 – and the average fund is only some £30,000.
    The temptation will be for irresponsible spenders who have amassed large credit card debts to take out their entire pension pots to pay off these debts.
    The result could be many more pensioners in poverty with only the state pension to live on – and consequent increasing “pensioner poverty”.
    Not the “sensible savers” we need worry about – it is the “irresponsible spenders” that will cause problems.
    This policy has not been thought through.

  • Magnolia

    I’m starting to worry about these pension changes being a way to support asset prices which ultimately carries on bailing out the banks…..
    All that pension money that will be released and sloshing around has to go somewhere and I think a lot of it will be used to help the next generation or the one after it to get on to or stay on the property ladder. Now there’s nothing wrong with people being able to keep their own money or for wealth to trickle down the generations and stay in the family but it might still be just a plain old banking bail out and there will ultimately be consequences for the rest of the economy as well as society.

  • Jackthesmilingblack

    “Private pension crooks with HMG playing the role of godfather”
    That was the drum I was banging for years. Private pension providers are still white collar criminals, but at long last HMG have asked themselves, “What`s my motivation here?”
    Jack, Japan Alps

  • Mike Barnes

    Lets not pretend this is about Tories trusting people.

    The Treasury has confirmed they expect this move to increase their tax receipts. George wants you to have access to all of your money straight away so you can pay one large tax bill on it up front.

  • Fergus McKenzie

    I’m going to spend it all – next year – quickly and irresponsibly – then depend on my “disinherited” kids and the state to look after me in my destitute dotage !!

    Drinking a toast to “pension pot diversification” tonite with a bottle of Cristal

    • Fergus Pickering

      You’ll have your old age pension. You can get by on that. If your children give you the odd tenner, then good for them..

    • HookesLaw

      As Mr Pickering says you will have your pension – and as a pensions expert said on TV yesterday the basic pension is being changed to set it at the limit where welfare kicks in so if you spend it you will not qualify for anything else. You certainly would not qualify for any sympathy.

      • Fergus McKenzie

        I’m only 54 so will get my hands on it next year – it will be a fantastic next few years !!! Would still need to limit draw down to less than 41k to avoid higher rate tax but everyone I know will be blowing the lot as quickly as possible

    • Jackthesmilingblack

      Sounds as if you`re already half way through your third triple whisky and soda. Cheers.

  • Smithersjones2013

    Trusting people with their own money is a fundamentally Tory idea

    Then why have they spent most of this government trying surreptitiously to redistribute wealth?

    Trusting people is a fundamentally centre right idea. The Tories have deserted the centre right.

  • colliemum

    “It’s time for the state to trust adults with their own money. “
    As if!

    My suspicion is that giving people this freedom to own their own money/pension pot is a necessary small step needed to allow the government access at the press of a button to private bank accounts which they can then raid when the EU ‘needs’ more money to rescue whatever bank or nation needs rescuing.
    Cyprus ring any bells?

    It is not by accident that HMRC has been given this ability already, only ‘in case of debtors’, naturally …

  • MirthaTidville

    There will be plenty, in the future, who do blow their pension pot and you can understand why. If you have saved and been sensible, then should you need a care home then the state will take all but 23K of what you have saved, regardless of where its comes from.Trust me there are new instructions out to local councils on various wheezes to extract it and all the arguments that they can ignore..

    However you only have to look at cases of members of the `National Union of Claimants`.. for them,all this is provided free of charge. No one asks if you have had in the past and wasted it, no sir..if you have nowt, they will provide. Now that of course is not sustainable but its what happening every single day. Can you blame people???..hmm answers on a postcard please

    • HookesLaw

      You are absurd.
      If you have over 23k in capital then the state expects you to pay for your own care home costs. The state does not ‘take’ anything.
      Indeed the govt have set a new care cost cap of £72,000, above which the state will meet eligible care needs. (see Age UK)
      How can people write such wrong headed rubbish – a huge mass of prejudice founded on nonsense.

      • MirthaTidville

        Nonsense? thats your speciality. I`m sadly speaking from experience having lost 3 elderly, close relatives recently, been closely involved in the matters I write about, including lengthy litigation and expensive lawyers. I, unlike you, have read the actual advice from the Government to local Authorities about how to challenge people. I have experience of them trying to pry into relatives financial affairs and at the same time, denying people NHS Continuing Care in order to get the vulnerable to pay for themselves. I could write a book on it numpty.If you want a further debate, on this subject you know sweet FA about, keep going……….

        • BarkingAtTreehuggers

          Punter pays for stuff that only concerns him/her.
          Hurrah, that’s NOT socialism!

          • MirthaTidville


            • BarkingAtTreehuggers

              You want care – then may I kindly suggest you pay for it yourself?
              Unlike the Daily Mail or Colonel Mustard want you to believe, Britain is not a socialist country.

  • Colonel Mustard

    Not very trusting to give HMRC the power to empty private bank accounts without having to prove in law that they are entitled to the money.

    Theft: The dishonest appropriation of the property of another person with the intention to deprive that person permanently of it.

    Not a crime that these days causes our “representatives” in Westminster or their invertebrates in Whitehall to lose much sleep, believing as they do in their statist, collectivist pinheads that what’s ours is theirs, including our souls, and what’s theirs is their own to as much as they can acquire.

  • PT

    Diversify? For those that actually do invest rather than spend their pension pots, the overwhelming majority will pile into BTL rentals.

  • swatnan

    You must be joking!
    And are you expecting the State to pick up the pieces when pensioners have gone on a spending spree and spent all their pension pot?
    Its like allowing people to drink smoke and take recreational drugs and overeat and self abuse, and then expecting the State to spend my tax money putting them back together as best it can. No way!

    • IanH

      There’s already a safety net, the Old Age Pension. Waste your pension pot and you’ll fallback to the basic pension only. What’s not to like about that? Take care with your pension pot and you can pass the remainder onto your children.

    • Redrose82

      What a stupid response. The pension pot is theirs not the states. Saved by them to augment their state pension. If they want to invest that pot in a different way to being forced to buy a low yielding annuity then that is only fair. Long time overdue in my opinion. The only people who can complain are the Insurance companies and those who believe in a nanny state – in other words socialists.

    • Alex

      Yes you are so right; because throughout history nobody has ever saved for the future or for lean times.
      Oh no, wait, they did, until the state started punishing them for doing so.

      This is an excellent reform. Now can Osborne gently introduce the concept that people should be allowed to make their own decisions to the rest of the government?

    • FrenchNewsonlin

      That’s the standard fallback position of the nanny-state-knows-best brigade so beloved by the Left. Pathetic. Real people take responsibility for themselves and their own lives.

    • an ex-tory voter

      The State has no right to criticise those who spend their pension fund in a way it disapproves of. After all, the State Supports without question those who have never bothered to create a personal pension fund in the first place.

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