Sunday 23 March 2014

Posted by Jake on Sunday, March 23, 2014 with 1 comment | Labels: , , , , , , , , , , , , ,

Chancellors of her Majesty's Exchequer are programmed to produce fists full of lolly in the year before an election. John, Norman, Ken, Gordon and Alistair did it. George Osborne was no different in the 2014 Budget. Chancellors in the year before an election produce lolly like the Child Catcher from Chitty Chitty Bang Bang.

The biggest lolly George is handing out in the 2014 Budget is our pension pots. Up until this brightly wrapped idea we were required to give at least 75% of our pension pots to pension companies, by buying an annuity. Now Osborne says we can take the money ourselves and do the right thing with it for our old ages.

This is of course a change of heart from Osborne. In the 2012 Budget Osborne thought pensioners were just simple souls. He said:

“We should also simplify the age related allowances - which the Office of Tax Simplification have recently highlighted as a particularly complicated feature of the tax system…The National Audit Office points out that many pensioners don't understand them."

Osborne's idea of ‘simplifying’ the age related allowances was to scrap them completely. A move Ros Altmann, the pensions expert, described as follows:

So why has Osborne decided that pensioners who are befuddled by a "tax doesn't have to be taxing" self-assessment form are astute enough to set up an investment programme to provide an income for themselves for the remainder of their lives? It is undoubtedly true that pension companies have been ripping off pensioners for years with rotten annuities. The financial services regulator the FCA reported in 2014 that pension companies swipe £230 million a year from pensioners in this way. But that scam has persisted because successive governments have allowed it to, having skipped every opportunity to legislate and sanction. 

Does Osborne think the best way to get the pension company wolves away from the pensioners’ doors is to take away the doors?

Or has Osborne learned from Gordon Brown, and from the banks?
  • Gordon taught George: A key factor in the boom that led to the Banking Crash of 2008 was people borrowing on their property. Let them liquidate their assets!
  • The banks taught George: Giving people large chunks of money (in the form of £20billion compensation for their PPI rip-off) will boost the economy.
In Britain the two great stores of wealth are property and pension pots. And of the two the pension pots are by far the greater. Figures from the Office of National Statistics show this:

Just as Brown fuelled a boom by helping people spend their houses, Osborne plans to fuel a boom by letting people spend their pensions.

A graph from a report by the IFS puts Osborne's generosity into a clearer perspective. A tiny bit of pink icing in the pre-election year floats on a dismal diet of gruel since the previous election. Benefits and tax reforms, according to the IFS, will cost the average "Couple with children, one earner" over £70 a week. And that doesn't even include pay freezes and inflation:

1 comment:

  1. FT reports:

    "George Osborne’s pension reforms have been motivated by a desire to bring forward tax revenues for the Exchequer and could worsen poverty among pensioners, says a former senior adviser to the government.

    Chris Daykin, who held the role of government actuary for the UK from 1989 to 2007 and is globally recognised in his field, has joined domestic and international criticism of the UK’s recent radical change in private pensions policy."


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