It gets my vote

The next general election is different from previous ones.  There is no guesswork as the date has already been set. The general election will be held on the 7th May 2015.  So when major changes are announced with regard to pension regulation that don’t fully come into being until the 6th April 2015, I know better than to get over excited.

The most revolutionary changes ever announced, that should put savers back in control of their pension life savings, may never be fully implemented.  If I was a socialist I would say that these proposed pension changes are nothing more than vote winning promises.  Promises made by the same ministers who reduced the maximum you could take from your pension pots when they first got in to power by 20%. The same ministers who have subsequently drastically reduced the total of the pot you could build in your working lifetime from £1.8m to £1.25m.   The same ministers who took 2006’s pension simplification and made things complicated again. Pension Complication.

But this blog isn’t to criticise.  It is to help our clients to benefit from these revolutionary changes, even if we have a very limited window within which we can benefit.  It is imperative we get together this year if you are one of my clients who are in pension drawdown or are considering pension drawdown in the future.  The maximum annual withdrawal that can be taken from our pension pots has just got significantly bigger.

In my previous blog I wrote about why annuities often don’t work due to life’s uncertainties.  I didn’t even focus on the fact that they were very poor value usually.

For Example. A pensioner drawing an income of £10000 a year ago has already just seen his income moved back to £12000 a year.  Now within a year it will become £15000 a year.  If all these promises go through we will probably be advising a typical client to withdraw around £40000 a year until their pension pot is emptied.  Any income which isn’t required immediately could be channelled into tax free new ISAs.

Its revolutionary.  It turns everything I have hated about pensions around. Earlier I said “our pension pots”.  As I was born in 1961  I can’t touch my pension pot until 18 months after the next general election.  I am therefore not holding my breath for these changes.  Within 18 months the present coalition could renege on election promises or could have lost the general election.  I can’t see either Labour or a Labour led coalition agreeing with these measures.

However, releasing everyones pent up pension pots in the last year of your term will accelerate spending by releasing hundreds of millions of grey pounds, it will boost the economy, it will increase the feel good factor and it should guarantee election victory.  I’m being cynical again – sorry.