Worries that the government is prioritising alternatives to pensions have gained currency after it came under fire for failing to mention the savings option in an online guidance graphic published at the start of the New Year.
Titled Ways to Save in 2017, the Treasury’s information guide suggests eight products that are deemed suitable for various stages of life.
Alongside a mention of a premium bond for growing families, the remaining seven suggested products all refer to Isa options, including the forthcoming Lifetime Isa. Pensions are not mentioned.
Former pensions minister Ros Altmann spoke out against the department’s decision to omit pensions from its recommended list of products, saying it was further evidence that the Treasury regards pensions as “a cost to the Exchequer”.
Dave Penny, managing director of Somerset-based IFA firm Invest Southwest, echoed those sentiments.
“I’m sure in every Budget, there is a close look at how can we try to ring-fence the cost of pensions. They’re very costly to the Treasury because they’re so good, and because they’re such an advantage to people in benefitting from tax relief, so it’s two sides of the same coin,” Mr Penny said.
During a recent parliamentary session, SNP MP Ian Blackford accused the government of being in favour of ‘downgrading’ pensions, a claim rejected by pensions minister Richard Harrington, who pointed to the success of auto-enrolment as evidence of the government’s support.
The debate has grown louder over the past 12 months after the announcement of the Lifetime Isa led to concern over the Treasury’s revenue-gathering intentions and younger people’s savings preferences.
One of the biggest points of concern with the infographic was the fact that it promotes the Lifetime Isa as a later-life savings vehicle.
Peter Bradshaw, national accounts director at Selectapension, admitted the Treasury’s move “caused some consternation in the industry”, but did not believe it was intentionally exclusionary.
Mr Bradshaw said: “The Treasury is supportive of pensions, and I suppose they’ve opted to highlight fresh ways of saving.
“But they probably should have reiterated the importance of saving into a pension for later life, because while it’s not a panacea for success in retirement, pensions are the most [suitable] vehicle for that purpose.”
Addressing the Treasury’s perceived complacency about pensions due to the success of auto-enrolment, Mr Bradshaw continued: “I’m not suggesting the government think it’s a job done, but it’s almost that they [believe they] can park pensions for a while, while concentrating on newer products.”
Invest Southwest’s Mr Penny added: “You have to hope it’s just a terrible oversight because otherwise it really is crass that at the end of that infographic, it says ‘we’re saving for later life’ and doesn’t mention pensions.”
He continued: “I think the Lifetime Isa has a place in the myriad ways you can save for retirement. It’s a good product, but not if it deflects people away from the benefits of pensions, which are enormous, particularly with pension freedoms now that they don’t form part of your estate, aren’t liable for inheritance tax and can be passed to your beneficiaries.
“The government should be really singing their praises.”
kuba.shandbaptiste@ft.com
