Pension changes bring freedom – to be poor

Your editorial on pension changes (FA, 11 December 2014) at least pointed out that the new ‘freedoms’ are for many (if not most) the freedom to go skint. I wonder how long it will be before what you withdraw goes on record, so that when the money runs out benefits will be refused?

I find the juxtaposition of the word ‘freedom’ together with pensions highly ironic. You have the freedom to blow your wad, but are being dragooned into auto-enrolment.

Let us go back 20 odd years and review the ecstatic headlines and copy surrounding the new personal pensions. Then came the stakeholder pension, the ‘simplification’, with almost limitless contributions and a whopping lifetime allowance.

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How many changes have we had to pensions over the past 20 years? (I have run out of fingers and toes). I would guess that the bulk of the workforce has at least 20 years to retirement. So how many changes will there have been by then? Perhaps we should not get too excited. If (as expected) interest rates increase in the next year or two and then thereafter revert to the mean (around 5 per cent) annuities will presumably start to look somewhat more attractive. With higher interest rates we normally get a more sedate rise in equities. However, over the past year, the FTSE 100 has only managed minus 6 per cent – a great boost for those in drawdown of various types.

Harry Katz
Principal, Norwest Consultants,
Stanmore, Middlesex