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The point is that it does not take an expert to recognise the parlous state of the current UK pension system. This has come about for a wide range of reasons. Arguably, however, the net effect and the biggest of the holes below the waterline is the loss of confidence that people have in the ability of any government, with or without the support of the pensions industry, to engineer a workable solution that will shore up the crumbling edifice that was once thought, however unrealistically, to offer future financial peace of mind.
To revert to my earlier cliché, the problem with pensions is that they are seen to be broken. Their flaws and fragility have been known about for decades. Over the years countless politicians, advisers and trustees have tinkered and tampered with them – with the very best of intentions, nonetheless, adding new layers of complexity and leaving loose ends for subsequent administrations to fix.
What now, austerity or encouragement for pension investors? The withdrawal of tax breaks to pension investors; a restriction of tax relief on pension contributions to the basic rate of income tax; perhaps the removal of or at least a reduction in the tax-free lump-sum entitlement of retiring pension investors? Investors’ trust in successive governments has been undermined as past pension promises are seen to have been betrayed. Worse still, the fear exists, that pension funds may just represent a convenient piggy bank to be tapped when government funds are running low.
Isas on the other hand are simple, transparent, personal and portable. They require no tax forms and the rules are uncomplicated. Assets can be accessed, cash withdrawn and for that reason, they continue to attract new investment. What is there to fix? Or perhaps rather more importantly for the long term, what is there to break?
Isas are simple, transparent, personal and portable. They require no tax forms and the rules are uncomplicated
Tony Vine-Lott is director general of Tisa