Pension legislation constantly changes. Previously it has never got any better for the investors. But never before have I seen such common sense exhibited. I am a tad sceptical. I can only deduce that the Government have actually asked someone who owns a personal pension what they would do.
No skin in the game
I have always been deeply sceptical of the civil servants deciding our future. They didn’t have any of their “skin in the game”. They could do what they wanted from high up in their ivory towers. They could never get hurt because they had generous, index-linked, final-salary, Government-backed, tax-payer funded, generous (I’ve said that already I know but I can’t emphasise it enough) pension schemes. They have no worries for the rest of their lives. Asking a typical civil-servant to try to understand the real world of pensions, like the ones you and me own, is impossible. It’s like asking me to judge an 18 metre diving competition. I’ve never done it and I can’t ever see me wanting to go up there either. What would I know?
Here are the basic changes. Wow!
- No need to buy an annuity (ok – this hasn’t been the case for some time for those with larger pots)
- Unlimited withdrawals from your pension pot (ok – subject to income tax but you are only giving back the leg-up HMRC gave you when you contributed)
- No Inheritance Tax on any final balance you pass to your kids on death (ok – if you are like me there won’t be much left by the time you die anyway if we enjoy a life full of adventures)
How good does it look?
Never again can the Nanny State tell us at what rate they consider it sensible to be spending our life savings. For the first time we can realistically spend our pension pots. Previously it was just about impossible not to die before your pension savings were spent.
For the over 55’s a pension now looks a whole lot like a bank account. A bank account where you can make any size of withdrawal at any time. You want to spend £8000 on a blow-out family holiday? Of course, just draw out £10000 and send £2000 to HMRC.
Surely that’s irresponsible of the Government
Well let’s take a look at the average over 55 person. They are a baby-boomer. They have a “mend and make do” mentality. In short they have spent a lifetime so far carefully saving money. Ask them to spend a large amount and they get palpitations. It’s just not in their psyche. I’m almost 53 and I include myself in this baby-boomer group. When I buy anything it usually comes hand in hand with a healthy dose of buyers remorse.
And spending a lot of money sometimes feels stupid. We may run out. We are not stupid, as Rickie Lee Jones said in 1979
Because there ain’t no man
Who got the money in his hand
Who got any of that bread
Bein’ slow in the head
Freedom from pension slavery
So we now have pension freedom after all these years. But with it comes a larger amount of sensible planning and self-control. Pensions just became a whole lot better but also a life-sentence of investment decisions. I look forward to the continued journey with all my clients.
Free at last. Free at last.
I hope it lasts.