What can you do with a couple of terms’ Parliamentary time when you are a government that has run out of ideas?
I know – let’s turn to Steve Webb who has always got something on the back burner.
Thus, one of the few interesting pieces of legislation over the coming year will pave the way for Collective Defined Contribution pensions.
The move grabbed a few positive headlines with one claiming, rather implausibly, that it could boost pensions by 30 per cent. In your dreams, buddy.
Such claims, leading to unrealistic expectations, are precisely what CDC pensions do not need.
Critics have been lining up to dampen down expectations. And there are undoubtedly questions over whether CDCs could be successful in this country.
There are undoubtedly questions over whether CDCs could be successful in this countryFor starters, a collective scheme goes against a generation of pensions legislation that has consistently moved towards individual pots and individual responsibility.
It has also been pointed out that those in collective schemes are unlikely to be allowed to transfer out and benefit from the new pension freedom announced in March’s Budget.
Then there is the question of who will run these schemes? Actuaries have not got a great track record of forecasting or recognising changes that can have a major impact on collective schemes, as anyone who invested in with profits can testify.
Imagine the outcry if pay-outs were to drop three-fold or four-fold as they have in just 15 years on with profits.
Once up and running, such a scheme will need considerable new money coming in to maintain its ability to keep up good levels of pay-outs to those who have retired. This implies no more fiddling with pensions after the current shake-up.
It has been pointed out that some Dutch pensioners in such schemes have not had their pensions increased for a decade.
But I do not see this as such a barrier. If this happened they should still be a lot better off than if their pension had been eaten away by charges and then an insurance company had taken a further bite when they bought an annuity.
Having said all of this, CDCs should be a welcome addition to the new pension landscape offering a further option to employers and employees.
For employers they would offer an attractive staff benefit without the open-ended risk of defined benefit pensions. For employees, it should provide a decent pension – possibly better than they would get from a standard DC scheme.
The key is that staff must be made aware that there are no guarantees.
And for goodness sake let us have them run by people who understand numbers.
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Cut tax breaks for the BTL set
As the housing market continues to boom in the South East, this would seem to be the ideal time for the government to crack down on the tax perks offered to buy-to-let owners.
I have pointed out in this column earlier this year that landlords enjoy a massive tax subsidy.
One estimate suggests that private landlords could be claiming as much as £13bn a year against their tax bills.
Not only do BTL investors make life more difficult for first-time buyers by competing in the same market, they are also helping to fuel the house price boom.
Surely the best way to take some of the froth off this boom – which is still largely a South East phenomenon – without hitting the rest of the country, is to pull back on these tax perks.
The most obvious is tax relief on mortgage interest – a perk enjoyed by a millionaire with a string of properties, but not by struggling FTBs.
It is time to phase out this anomaly.
Homebuyers were expected to take the strain when Mortgage Interest Relief at Source was phased out in the 1990s.
BTL owners could equally well do it now.
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What are we waiting for?
Investor confidence rose in May to 119.5 (100 is neutral), according to the State Street Global Exchange Investor Confidence Index.
This index measures risk appetite by analysing buying and selling patterns of institutional investors.
Why, then, am I so nervous?
The FTSE 100 is toying with its all-time high and small investors appear to be piling into the market. There is a stream of IPOs lined up, but few of the recent ones have done anything of interest, with the exception of Royal Mail.
A number of fund managers have said they are waiting for a market correction.
And looming behind it all is the prospect of the US Federal Reserve ending its money printing exercise.
It feels like we are surfing along on the crest of a wave; we know it must break sometime, we just do not know when or with how much ferocity.
Tony Hazell writes for the Daily Mail’s Money Mail Section
