A pension bombshell

Jeff Prestridge

Jeff Prestridge

Some of my financial planning friends are still salivating from the pensions mess George Osborne has created. They cannot get enough of the chaos his tinkering has caused. Bring it on, they say.

Of course investors looking to build a retirement war chest think differently. They are bewildered and baffled by George’s meddling – and they ring The Mail on Sunday to tell me so, screaming down the phone as if I will be more impressed the louder they shout. My phone wilts in the pensions heat.

After telling them to find a good financial planner (aren’t all planners good by definition I hear you ask?) I am forced to lie down a while, take an energising Berocca drink, and recuperate from the ear bashing. I then return to my desk, only for my phone to trill again like a budgerigar on steroids.

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Having got that off my chest, I am really pleased that out of all this chaos and confusion, opportunities now abound for financial planners to show their mettle.

And never has there been a time when confusion has reigned so supreme in the wacky world of pensions – and adviser mettle has shone so brilliantly. Planners are in their element. Seventh pensions heaven.

I say all this without considering the mounds of advice planners can now dole out as the new pension freedoms start to grip and people look to extract some of the money from their plans – £1.8bn in the first two months, according to our good friends at the Association of British Insurers.

Plenty of issues for advisers to get their shiny teeth stuck into. Taxation. Inheritance. Longevity issues. Transferring defined benefit plans into defined contribution arrangements to take advantage of new rules allowing pensions to cascade down the generations. Cash-flow modelling. I could go on, but I know you are chomping at the bit.

Returning to the subject of July’s Budget, I am still scratching my head with pensions disappointment. Despite pleas not to turn pensions into a financial minefield, and despite being shorn of a left-wing Liberal pensions minister in Steve Webb, Mr Osborne went ahead with his previous promise to cut the lifetime allowance from £1.25m to £1m, effective from next April.

It is a move which still baffles me – and will irritate me until I go to my grave. It turns pension saving for some into a lottery as they scratch their heads and wonder whether to continue funding their pension or put money into other tax-efficient vehicles such as Isas, venture capital trusts and enterprise investment schemes.

The cut in the lifetime allowance simply flies in the face of everything that a Conservative government should stand for. Provide for yourself, insure yourself against illness and death, and save like crazy for the time when retirement comes.