Morrison Blog: Pensions require long-term planning

Most weeks I have a range of subjects and deadlines to juggle, with the aim of producing whatever I have committed to in the form of articles or blogs by the stated deadlines. Usually I have something of a mental checklist of relevant subjects, but sometimes this can be usurped when a new 'hot topic' arises or, on rare occasions, when something annoys me such that I really feel it needs saying.{desktop}{/desktop}{mobile}{/mobile}So, as I sat down this morning to probably write something about annuities and retirement income, I became distracted by a headline in the national press; "Labour in tax raid on pensions to help jobless". The article explained that people earning more than £150,000 would get only 20% tax relief instead of the 45% they receive now, and that this money, along with bankers' bonuses (are they really considered in the same light?), would be used to directly fund the Compulsory Job Guarantee –one of Labour's welfare reform policies.Don't get me wrong, it is not the change to pension taxation that annoyed me, but rather the short-term nature of the policy and the reliance on pension money for a short-term fix.Like many people in the pension world, I think we can expect further changes to pensions and savings incentives. Indeed, there have been a number of reports pointing out how much higher rate tax relief costs and how it is targeted at the wrong people, and suggesting alternative solutions.The Pension Policy Institute addressed this comprehensively in its report Tax Relief for Pension Saving in the UK in July 2013.With the election looming next year, lots of think tanks and other organisations are airing their views on future pension policy. The Liberal Democrats announced that their pension policy would be to reduce the lifetime allowance from the £1.25 million that it will be from April 2014, to £1million (choosing amendment to the lifetime allowance as the right mechanism rather than changing the rates of tax relief, which could be complex).I am assuming that the Labour Party proposals are based around the tapering mechanism proposed ahead of the last election by Alistair Darling, which was criticised at the time as being too complicated!In my view, pensions and saving for retirement are massive problems facing not just the UK, but many countries in the world. Demographics , longevity and a range of other factors have changed the retirement landscape.Pensions are important and deserve a proper long-term coherent policy, rather than becoming just a short-term fix for policy issues. Pensions are also the easy touch, the low-hanging fruit that is easy to tax – should we really be dealing with it in this way?Now, I could finish up the word count with a raft of research and statistics, but instead I shall focus on just one.{desktop}{/desktop}{mobile}{/mobile}NS&I, in their recent Quarterly Savings Survey, considered how Britain's savings behaviour has changed over the last decade. The first bit looks good; the British are now saving 7.76% of their incomes each month, when five years ago they were only saving 6.42%. When it comes to retirement, however, the story is a bit different and the numbers paint a bleak picture. Only 22% of people are saving for retirement, when in 2007 this was as high as 38%.As I said before, there are all sorts of statistics that would show a similar picture.Pensions need a policy to reflect their importance. This needs to be a long-term view, looking at future generations and demographics – not just a short-term tax grab to meet a short-term manifesto promise.

Morrison Blog: Pensions require long-term planning – from politicians

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