HMRC Claim Pension Revolution Success

HMRC Claim Pension Revolution Success.

HMRC and HM Treasury yesterday issued a joint release suggesting that “Britain’s pension revolution goes from strength to strength”.

They claim that since flexible freedom drawdown rules were widened to be available to the mass consumer in April 2015, over £6bn has been drawn down from our pension funds.  In addition, these freedoms will be expanded from April 2017, when people with annuities (income for life) will be able to sell/cash in some or all of their annuity to access cash lump sums.

Already, since April this year, £1.7bn has been drawn by 159,000 people.

The Economic Secretary to the Treasury, Simon Kirby, said:  “It’s only right that people should have a choice over what they do with their money and today’s figures show that pension freedoms continue to be a popular choice.  Our pension reforms have already given hundreds of thousands of people access and responsibility over their hard-earned savings and we will continue to make sure that the pension freedoms work well for everyone.”

Comment

Whilst flexible drawdown is welcome, it can also be dangerous.  You only have to have a consumer drawdown too much from their pension fund, at the same that its underlying investments funds are falling in value, e.g. stock market funds or even be invested in funds that are suspended e.g. property funds, to have pensioners getting into trouble.  What if you run out of money?  Who pays then?  The financial adviser, state benefits, or do you go hungry.

We like the idea of flexibility but we still believe there should be a cap on how much you can draw down.  Is there a conflict of interest for the Government?  The more you draw down today, the more tax you pay today.  We will never ever forget the late 1980’s when government told consumers that Personal Pensions were the ‘bees knees’ and then a few years later a pension misspelling scandal was launched to refund £billions in compensation paid by the financial industry for Government folly.  We expect another pensions mis-selling scandal when things go wrong and the Government will step back and blame the financial services industry.