OpinionOct 8 2014

We’ll miss Osborne and Webb partnership if Labour triumph

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The Osborne and Webb pension reform partnership may be in its last few months but it shows no signs of becoming jaded.

The decision to scrap entirely the punitive 55 per cent tax rate that could be levied on money inherited within pensions has ironed out an anomaly in the reform process – and once again gone a lot further than people had hoped.

Scrapping this charge gives another green light to pension saving.

And it means people will feel safe leaving money within a pension, even past the age of 75.

This 55 per cent charge never made any sense; it was an unnecessary and vicious tax grab on the bereaved.

Like the other pension reforms this change has Steve Webb’s fingerprints all over it.

How we will miss him after next May’s election. Already we have been given a taste of the return to confusion and mismanagement that awaits should Labour be elected.

Rachel Reeves, the party’s shadow pension minister last month revealed her tenuous grasp of her portfolio when guessing that the basic state pension was less than £100 a week.

Heaven help us if she becomes pensions minister (though based on the last Labour government she would only have the job for a few months at best).

As it stands, by the time the election happens pensions will be in their healthiest position for years.

By the time the election happens pensions will be in their healthiest position for years

It was impossible to reverse the damage wreaked on final salary schemes by tax raids, accountancy changes and misguided government policy.

But for the vast majority holding private pensions the rules are now simple and fairer and the incentives to save look better.

Those dinosaurs in the industry who believed they would be allowed to continue to use pensions as a comfortable source of profits had the rug pulled from under them with the scrapping of compulsory annuitisation.

Those who advise on pensions now operate in a clearer landscape where they will be able to assist clients throughout their retirement.

Investing into a pension has clear rewards rather than being a hazardous process with questionable benefits.

This latest change will mean more money pouring from one generation to the next – and they will simply pay income tax on their marginal rate on any money withdrawn. That is as it should be.

Those who save throughout their lives should know that their children and grandchildren will benefit.

Any politicians who believe the state has the right to grab the majority of those assets have their heads and their policies stuck in the middle of the last century.

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Woodford sings a new tune, why?

How refreshing to hear Neil Woodford standing up for investors on BBC Radio 4’s Today programme.

Over the past couple of years we have heard the welcome sound of ranks breaking with more fund managers admitting investors often get an awful deal.

Terry Smith is another who has rapped the knuckles of those in his own industry who feel they can charge premium prices for indifferent performance.

It is interesting that the previously tight-lipped Mr Woodford seems more willing to comment on issues since leaving Invesco. I can only speculate on why: was he constrained at Invesco? Does he feel more freedom in his new role? Perhaps publicity is suddenly more important to him? We may never know.

Whatever the reason his intervention on this issue is important because he can draw attention at prime time and win column inches in newspapers.

Woodford suggests that charges have further to fall. He is undoubtedly right.

RDR has created more competition and transparency.

Tracker funds saw record net retail sales of £532m in July – and now represent more than 10 per cent of the investment management industry’s assets.

We are moving towards a world where people will take the cheapest option for bog standard performance and will only be willing to pay extra for something special – and even then there is a limit to how much they will be willing to pay.

Mr Woodford knows this. But plenty of others need to wake up and smell the coffee.

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Labour’s dim light

As barmy ideas go, it was barmier than most – so does anyone want to bet that Labour’s proposed mansion tax vanishes without trace?

This felt like a policy dreamed up by a naive PPE graduate fuelled by rather too much claret.

Anyone with a decent head for figures could see that taxing those who live in properties worth more than £2m was a non-starter.

It is grossly unfair on pensioners who live in London or the South East.

And many Britons are extremely aspirational about property.

Most importantly, we know that a tax set at £2m can become a tax that starts at £1m or £500,000.

Back to the drawing board, I’m afraid.

Tony Hazell writes for the Daily Mail’s Money Mail section. He can be contacted at tony.hazell@gmail.com