So another plan to alter pension tax relief is being hatched. I am sure those behind it think it is a jolly good one.
Let us offer more tax relief to younger people then taper it away as they get older. That will surely provide a greater incentive to the young to save more.
No doubt the plan has been thought up by well-off and well-meaning civil servants, financial gurus and politicians, but they appear to have forgotten one key fact.Young people do not save more into their pensions because they have other priorities, both social and financial. These include paying off a student loan, attempting to keep voracious banks with their incessant charging at bay, paying the rent, saving a deposit for a home, furnishing it, juggling credit card debts, keeping up an active social life and, of course, going on holiday.
It does not matter how much tax relief is on offer – a pension will always come below these essentials to maintaining a 20-something lifestyle.
And so it should. As a financial nerd, even in my 20s I appreciated the importance of saving into a pension and that an earlier start should make for a much larger fund. But my mortgage and a host of other bills took priority. So I saved, but not a lot.
And, like many, it was only once I was in my 40s and felt more financially established that I began to pile cash into my pension.
There is no doubt that pension tax relief is ripe for reform. But basing it on age would once again play into the hands of those who are already better off. The people likely to gain most would be those from the wealthiest backgrounds whose parents had paid their university fees and given them a hand with housing costs.
Basing relief on age would also be unnecessarily complex for individuals and the pensions industry.
Surely the simplest option is also the best. Give a standard rate of top up to all. Put an annual cap on contributions and, if necessary and workable, put a lifetime cap on them too – but not on fund value because this punishes good investment.
People should not receive more tax relief because they earn more, but neither should they get less.
Most important – and this is the biggest problem with the age-based idea – people should not be disadvantaged because their career gets off to a slow start and they happen to be in a better position to save later in life.
PPI issues keep festering
My initial reaction was straight out of the Victor Meldrew phrasebook: “I do not believe it!” The headline to provoke it appeared in the Daily Mail telling of how banks were “snatching back PPI payouts”.
One bank asked a couple to repay £15,000 in compensation – it backed down after Money Mail intervened. Another took more than £1,500 from a customer’s credit card only to be told by the Financial Ombudsman that it must return the money plus £300 compensation.
It is more than 20 years since banks started selling PPI. Since then they have sold shed loads of useless insurance to people who did not need it, they have stalled and deceived those who applied for compensation, they have attempted to shift the burden of dealing with complaints on to the Ombudsman and now some are trying to claw back money they think they may have paid in error.
Banks are constantly pleading to have a line drawn under issues such as this – yet they themselves appear perfectly happy to keep the issue festering when it may be in their favour. If I ran an organisation that asked members of the public to trust it with their money and that would be expected to have a modicum of arithmetical ability I might be a little embarrassed by a failure to do the sums properly.
But not these banks. They seem happy to broadcast their numerical ineptitude from the rooftops.
Currency quiz
Which brings me neatly to the poll by the Organisation for Economic Co-operation and Development showing only 48 per cent of Britons could answer a financial quiz to minimum standards.
Better performing countries include the Czech Republic, Poland, Lithuania and Hungary. Anyone who has been served in a coffee shop or restaurant by an émigré from one of these countries will probably confirm that they often seem far more adept at handling our currency than local youngsters.
Perhaps the banks could invite them to sort out their PPI compensation operations.
Tony Hazell writes for the Daily Mail's Money Mail column.
t.hazell@gmail.com
