Major progress on pensions

When all the political heat and light over the budget has died down there are two things it is likely to be remembered for.

The first is the increase of the personal allowance to £10,500 which lifts the threshold at which people start paying income tax and will thus free many low paid workers from having to pay income tax at all. This tax cut for the poor, and previous such increases in the threshold, demolishes the ridiculous Labour propaganda that only the rich have had tax cuts from the present government.

But possibly even more significant in the long run are the measures to protect savers and especially those saving for their retirement.

I'm already older than my father was when he retired, but still hope and expect that I won't be retiring for more than a decade providing I still have a job and my health. Admittedly, my father took early retirement on ill health grounds, although an awful lot of his contemporaries and near contemporaries also retired in the 1970's and 1980's at similar ages which now seem ludicrously young to be retiring.

I remember that I nearly fell about laughing at the age of 25 when I was handed my first permanent contract of employment and saw that it envisaged a retirement age of sixty. I didn't need to have just finished two degrees in Economics to realise that by the third decade of the 21st century Britain would not be able to afford to have people in good health retiring at that age. Even with many people retiring in their late sixties, the average length of retirement is and will remain much longer than it was at the time our pension and social care systems were originally created.

Those of my father's contemporaries who had, like him, been to University, who retired at similar ages, and who lived to their early eighties had, or have so far had, retirements which lasted as long as their working lives. Good luck to them, but the consequences to the pensions industry, the NHS and social care services, and the exchequer, of millions of people having retirements which last for two decades or more are gigantic. To make sure that this is a blessing, as it should be, and not a problem we must help as many people as possible to plan successfully and be self-supporting in old age.

There are many aspects of the previous pensions system which infantilise the elderly and penalise those who do the right thing.

The single worst UK government financial decision of the past quarter century - and that's saying a lot, because it's saying even worse than Black Wednesday and the ERM, even worse than the mishandling of Banking regulation, and making selling off of gold reserves on the cheap look like a minor irritant, was Gordon Brown's catastrophic £6 billion  a year raid on pension funds. But that was only the worst single part of a "Nanny knows best" regime which penalised saving, limited what people could do with their pension pots, and virtually guaranteed a succession of bad bargains for pensioners by requiring them to buy an annuity.

I was delighted when George Osborne announced today that the government will act so that no pensioner is forced to buy an annuity in future. There will be some pensioners for whom an annuity is the right solution, but I am convinced that giving people the choice is certainly a massive and long-overdue reform because in pensions as in housing or interest rates, one size does not fit all.

This was only the start of the measures to help savers and pensioners as the Chancellor promised to
support people who have “worked hard and saved hard all their lives, and done the right thing.”

Savers have been hit by years of record low interest rates and other emergency measures put in place to boost the struggling economy.
 
As the economy starts to recover, George  Osborne said that savers and pensioners deserve help. “These are people who have made sacrifices to provide for their own economic security in retirement.”

From July, there will be a new £15,000 Isa limit, which can be used to deliver tax-free returns on either cash or shares. The 10p starting rate of tax on savings income will also be abolished. And new “Pensioner Bonds” will pay enhanced interest rates to savers aged over 65.

I think that George Osborne will be remembered for these reforms when much of the sound and fury of this week's debates are long forgotten.

Comments

Jim said…
the pensions part is good, its overdue, but its still an improvement. One worrying aspect of the budget is this one

http://blogs.telegraph.co.uk/technology/willardfoxton2/100012871/did-you-spot-this-budget-gives-hmrc-power-to-raid-your-bank-account-like-wonga/
Tim said…
"............was Gordon Brown's catastrophic £6 billion a year raid on pension funds"

Nearly 4 years of this government and still they won't reverse this catastrophe, they've got the money - just stop giving it away to third world Kleptocrats.
Chris Whiteside said…
I'd reverse it tomorrow Tim, but it's not that easy to find that kind of money when we have the sort of deficit that the country still has.

I've lost count of how many times over various people have suggested we could re-spend the foreign aid budget, but Cameron did make an election promise to protect it.

I'm all in favour of making sure aid genuinely goes to help the people most in need and not on abuses or "taking money from the poor people in a rich country and giving it to the rich people in a poor country" and I won't pretend there has not been some of the latter in the past.

But I don't think giving the money to "third world kleptocrats" is an accurate description of Britain's aid budget today.
Jim said…
This country needs no deficit, also its national debt is unlawful, so that is rather a moot point dont you think?

Come on just think logically for a monent. What have we borrowed that we need to pay back with interest? The answer is we have not borrowed anything.

Popular posts from this blog

Nick Herbert on his visit to flood hit areas of Cumbria

Quotes of the day 19th August 2020

Quote of the day 24th July 2020