Damian Fantato  

More long-term pensions thinking required

Damian Fantato

Damian Fantato

Pensions are widely considered boring and not worthy of much concern – until they are not.

Those encouraging the population to engage with their retirement savings will be able to empathise with Sisyphus, the Greek king condemned to eternally push a large rock up a steep hill only for it to roll back to the bottom.

Many involved in the financial services sector – including advisers and journalists – have a tale to tell about a friend or relative who did not believe in pensions, stemming from a complete misunderstanding of how they work.

But every now and then, something happens that thrusts pensions into the limelight – relatively speaking, at least.

The latest is the issue around the tapered annual allowance, which has led to highly paid public sector employees facing tax bills because of their pension contributions.

Ministers have suddenly found themselves scrambling to resolve this as it has led to doctors retiring early or opting out of the public sector – placing further strain on the NHS.

And as we have seen, the effects extend beyond doctors, to teachers, judges and senior military personnel – many of whom are meeting the extra tax demands from their pension.

The tapered annual allowance, which was introduced in 2016, has certainly earned a pretty penny for the government’s coffers, with a big increase in the number of people facing tax bills for exceeding the limits on pension tax relief. But this episode demonstrates that long-term planning for retirement is not something politicians think about much either.

Auto-enrolment will, hopefully, encourage the British public to engage properly with pensions, but if we want them to do so then we need our politicians to do the same first.

The issues with the tapered annual allowance stem from constant tinkering, which needs to end.

There needs to be more long-term thinking.