BEN WILKINSON: Freedom can be costly when it comes to pensions so always think long-term
The five-year anniversary of the pension freedoms comes with a blunt warning: savers are pulling their cash out at an unsustainable rate.
Former Chancellor George Osborne’s reforms mean that once you turn 55 you can tuck into all of your pension savings.
Back then, pensions minister Steve Webb said savers should be free to do what they want with their cash – even if that meant buying a Lamborghini.
Temptation: Former Chancellor George Osborne’s reforms mean that once you turn 55 you can tuck into all of your pension savings
But with power, comes responsibility. And half a decade on, the Association of British Insurers is warning that many middle-aged savers may not be doing what’s best with their pension pots.
The insurance body says nearly £33 billion has been cashed in over the past five years, and many savers are in danger of running out of money later in life.
Some experts argue that 55 is simply too young to have free rein. Indeed, healthcare is improving, we are retiring later and later, and we are forecast to enjoy much longer retirements than even a few generations ago.
So our savings need to last much longer — but we are digging in too deep and too quickly.
And our story about the British pension scam victims fighting for justice in a Spanish court, illustrates how dangerous the freedoms can be.
But perhaps the real problem with pension saving today is that it is simply too convoluted for the ordinary person to know what’s right for them in the long term.
Savers need a clear path to retirement, but instead the route is obstructed by tax questions, investment dilemmas, and now, a vast array of ways of taking your pension — many of which could cost you dearly.
What’s the point in being able to do what you want with your pension if you have no idea what is for the best?
Some of the nation’s smartest, our senior NHS doctors, are even being caught out in pension tax traps that are forcing them to retire early and cut back on extra shifts. Steve Webb today says the tax relief system is ‘hideously complex’.
Next month, new Chancellor Rishi Sunak will present the first Budget of his Conservative Party’s strong majority government.
But at a time when savings rates are stubbornly poor, newspapers have been awash with rumours that higher-rate taxpayers could lose their 40 per cent pension tax relief.
It defies belief that this proposal was even on the table when pension saving has never been more important.
However, reforms seem to come only piecemeal. A sticking plaster here, a bit of experimental medicine there, when really the whole system needs retuning.
On March 11, Mr Sunak has a chance to launch a consultation to clear up the muddle, and empower savers with the incentive and understanding to work towards a decent retirement.
What pension savers really need is freedom from obfuscation.
Left high and dry
It’s so disappointing to see that the hotel comparison sites that enjoy so much of our business are far too often letting us down.
Our feature today tells how travellers who used trusted household brand names have travelled abroad — only to find out their accommodation is a wreck or has long been shut down.
To make matters worse, the response from the booking sites has been unsympathetic at best.
These websites — including Booking.com and Lastminute.com — seem happy to take your money and run. It’s time they took responsibility and spent some of the vast amounts they must make in commission to focus a little more on customer care.
Any luck, savers?
Savers haven’t got much going for them at the moment. Interest rates show no sign of recovering, and inflation is eating away at their nest eggs.
After National Savings announced sweeping cuts last week, one Premium Bond holder got in touch to ask if his 50-year no-win streak could be a record.
Money Mail would love to hear from other savers who feel they have been particularly unlucky, or even lucky, with their lot.
Please do write to us at 2 Derry Street, London, W8 5TT, or email [email protected]