OpinionNov 5 2014

Pensioners will be with us for some time to come

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Research commissioned by Hargreaves Lansdown on what savers will do with their pension pots after April 2015 has been reported in such a way as to suggest that the word “pensioner” might be eroded from our vocabulary within a generation.

I wonder if the financial services industry has brought this on itself. We have been banging on about trust and ethics (or the lack of them) for decades. Mis-selling scandals repeat with sad inevitability.

The FCA issues alerts about pension liberation and investment scams pop up more often than a teenager’s bad acne.

Press coverage of pension charges, costs of investing, Libor rigging, pension scheme funding problems and the banking crisis must all lead Joe Public to deduce that, given half a chance to avoid financial institutions taking even more liberties with their money they should take control of their funds and do something useful with it before someone else does.

The numbers do not, in truth, support such wild assumptions. That one in eight plans to cash in all his pension does not imply that those people are profligate or irresponsible. Neither does it recognise that seven out of eight investors will keep some or all of their pension pots invested.

Dig deeper and we can work out that 3 per cent of those surveyed will spend some of their money on holidays, while 1 per cent will buy a new car. One or 2 per cent each offered up DIY, helping their children and repaying debt as spending priorities. I am not clear if we are talking about the same 1 per cent of the population which is going on holiday in their new car, having installed decking, paid off the mortgage and helped the kids, or whether 12 per cent of the population is cashing in and going on a spend-fest during 2015.

I find nothing strange about those numbers. Even before the pension reforms, we all had clients who would have spent their tax-free cash and pension income on any or all of the above. Why on earth would that change?

We all had clients who would have spent their tax free cash and pension income on holiday, a new car and home improvements

Those retiring and with cash in the bank will always want to help the kids, pay off the mortgage, and do some home improvements, all of which are investments in one way or another. And are we advisers so po-faced and obsessed with saving that we really begrudge someone (or even ourselves) choosing to buy a new car and the proverbial round the world cruise with their (our) own money?

Gill Cardy is network development director of Validpath