New Home Owners And Snagging Forum
Investments => Cash ISAs and saving accounts => Topic started by: The Prophet on March 11, 2013, 01:46:59 pm
-
George Osborne is treating the cash that is tied up in your private and company pensions as a treasury cash machine.
In the Budget next week, he may be the latest chancellor to skim something off.
Chancellors like raiding your pension.
Voters are less sensitive to pension raids than they would be by a rise in Vat or income tax. Pension robbery goes largely unnoticed by most people, it does not affect their present day lives.
It is not until they realise that their pension pot is far lower than even the lowest of forecasts and that attractive benefits saving for a pension gave at the outset, have been largely taken away by various governments over the years.
Why would anyone now choose to save into a private pension when the government seems intent on changing the rules and moving the pension goal posts?
It all began when Gordon Brown raided pensions in 1997.
Before then, pension funds received a 20% tax credit on dividends received from British firms to offset the corporation tax already paid by companies on their profits.
This double taxation currently earns the treasury £8billion a year.
Then we had 'A-day'.
Designed to clean up and reform complications with pensions, but during the process other benefits were changed.
The age at which you could take the 25% tax-free lump sum was raised from 50 to 55.
Then they cut the amount you could save in a pension each year from £225,000 to £50,000 and to £40,000 in 2014.
Osborne may even cut this to £30,000 next week.
There are rumblings that Osborne is planning to limit the amount of tax-free you can take at age 55, currently 25% of the pension pot.
A dangerous precedent was set in Ireland in 2011, capping the lump sum to £175,000.
That may sound a lot and would only affect people with pension funds worth £700,000 or more.
But once the principle is set, before long the tax-free amount could be reduced further in subsequent budgets in addition to being reduced in real terms by inflation.
Those retiring in 15 to 20 years time may find this benefit all but eroded away when they reach 55, assuming this age is not raised again to 60 in the interim period too.
Messing about with changes to pension rules, even speculation, undermines confidence and actively discourages saving.
Why would anyone save when no one can forecast what the rules will be in say five years time, let alone when it is time to retire.
Finally, we have a loose monetary policy that is eroding the real value of our savings.
QE and inflation now mean, that according to research by Moneyfacts, annuity rates have fallen 11.5% in 2012 for the average for a 65 year-old man. Since 1994, the average annuity rate for a 65 year-old male has been reduced by 56%.
Everyone is better off saving for retirement using an ISA.
At least you have control of your money, can take it out when you want to and it is not taxed.