When will they stop messing with pensions?
Governments have a nasty habit of tweaking the pension system, be it the state pension or the rules governing personal pensions. George Osborne in particular loves to tinker and was rumoured to be preparing another pension revolution in his imminent Budget. In the last 24 hours counter-rumours have circulated that Osborne has performed a potential u-turn, scraping his plans. Will he or won't he fiddle with the current pension rules? It's a debate we shouldn't even be having!
The pension system has always been (and still is) horribly complex. But on a positive note the pension freedoms which George previously brought in went a fair way to simplifying things. Not only that but they got the general public re-engaged with the idea of pensions and saving for retirement. If you ignore the scaremongering of old people buying Lamborghini's with their pension pots (this never happened by the way) it would appear that there was some light emerging at the end of the 'pension savings' tunnel, especially if you take into account some of the successes of auto-enrolment.
But let's not get carried away. It seems like almost every week a new report comes out stating that we are not saving enough for retirement. Have a conversation down the pub and most people will say things like 'buy property instead'. So why doesn't the public like to save via a pension?
It's a question of trust
People mistrust pensions and the reason goes beyond pushy salesmen, the profiteering insurance companies and the pension products themselves. From where I stand I see a lot of the mistrust stemming from the constant meddling with pension legislation.
Imagine if you were about to go on a holiday, which you'd booked years previously, only to be told by the holiday company that your holiday has been changed to a completely different country and not only that but everything has been downgraded. Plus you are going to have to pay more money to cover the cost of the changes. There'd be uproar and you certainly wouldn't trust the holiday company with your money again.
Well that's what happens when successive governments meddle with pension legislation. Do you honestly believe that by the time someone in their thirties gets to retire that pension rules won't have been changed back in order to stop them cashing in their pension? Of course they will, as the State can't afford to look after an ever ageing population on its own. God only knows what form the State Pension will even take by then, if it still exists that is.
One thing for sure is that nearly all changes to pension rules are made to generate (or save) money for the Government. Letting people cash in their pension provided a nice tax windfall for the current Government.
Retirement planning is a lot like a football match, whereby you can only play the team in front of you. So you have to base any pension decision you make on the current legislation and rules. The trouble is that if, like FIFA, those in charge keep bending the rules for their own benefit then trust is rapidly eroded and hard to win back.