Pensions obscured by fog of complexity

Replacing it with a simpler regime has long been undoubtedly the way forward.

How sensible it should be if everyone could know exactly how much they would get from the state as long as they paid enough national insurance.

But far from being simpler, the transitional arrangements are more complex than anything that has gone before. This might not matter if the transition were brief, but it is one that will stretch out for decades.

Teething problems were to be expected – but this is more like drawing teeth.

I have read the 26-point note issued by the department for work and pensions on the effect on someone previously contracted out.

I would lay £1 to £1m that no lay person would have a clue what is happening to their pension based on this.

Respected pension specialist Malcolm McLean of Barnett Waddingham described the arrangements as “mind-blowing” in their complexity. Well, my mind is well and truly blown.

There has been trouble brewing here for some time. People were initially led to believe they would receive a flat rate pension of around £151.25 a week.

The DWP admitted that most people would not get the full pension when it was introduced in 2016

This was blown out of the water in May last year when the DWP admitted to me that most people would not get the full pension when it was introduced in 2016.

They were well aware of this, as were those in the industry, but the huge response to my story made it clear that Joe and Joanna Public did not have a clue.

It has taken more than a year for DWP to admit that two-thirds of people will not receive the full pension at the outset.

So less of a flat pension and more of an alpine cliff, then.

There is a very serious point here. People are trying to plan for their retirement – and the state pension will be the bedrock of many people’s plans.

But if the basis for their calculations is obscured in a fog of complexity from DWP then how can they hope to plan sensibly?

Clarity from the start would have helped. Now it would be even better.

These changes should be a good thing.

Pensions minister Baroness Altmann must ensure that the poor way the transition has been handled until now does not undermine the very real benefits the new pension offers over the long term.

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Doing away with duplicity

Banks and building societies have a well-deserved reputation for trickery when it comes to savings accounts.

Their marketing ploys are designed to deceive savers into believing they are earning more on their money than is actually the case.

Changes proposed by the FCA will consign some of their tricks to the dustbin.

For starters they will be forced to tell savers when a teaser rate comes to an end.

I have never understood how mutual building societies have felt it is a decent and honest thing to leave people they claim as members in the lurch at the end of a special deal.

Interest rate information must also be made more easily accessible. Some already do this, but others bury information on older accounts in the depths of their websites.

It would be simple to show the current interest rate along with the balance on their websites, but few do this.

These changes are important because the savings market should begin to liven up next year if, as expected, the Bank of England raises interest rates.

As rates creep up the gap between the best and worst will widen again, and savings will once again become an issue worth considering for a wider range of people.

Savers have carried far more than their fair share of the pain since bungling banks crashed the economy.

So it is right that when rates do start to rise they will do so in a tougher and fairer regulatory environment.

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Cascade it back

Former prime minister John Major once talked of wealth “cascading down the generations”.

The latest equity release figures suggest that for some it is cascading back into their pockets.

The Equity Release Council says that £384.3m was released in the second quarter, continuing an upward trend.

And why not? For some the alternative will be handing 40 per cent of the money to the taxman, even with higher inheritance tax thresholds to come in 2017.

Better to spend it now than hand it to the taxman later.