Taking a cut

Tweet I’ve been a bit uneasy from the outset about Osborne’s decision to give people more freedom about how they should use their pension pots.  On the one hand, it’s difficult to argue with the idea that people should have more freedom about the ways in which they use their own money.  But on the other, those accumulating large pension pots have done so partly on the basis of preferential tax treatment of the money salted away.  That preferential treatment was given on the basis that people were prudently saving for retirement, and would never have been granted to anyone who said they were simply saving for a Ferrari.

Part of my unease is about people taking the ‘wrong’ decisions about how to use their pension pots; but neither am I convinced that the state always knows best when it comes to people making decisions about their own retirement.  Governments don’t exactly have an unblemished track record when it comes to taking decisions for us.

My unease was increased recently as the result of a marketing mail shot which I received from a financial services company.  Other than the fact that my age puts me in the right demographic, they’ve clearly done no research or pre-qualification whatsoever before telling me how they can help me access tax free sums from my pension without even having retired.  The company concerned would, of course, help themselves to 5% of the sum released, and, apparently, an annual fee for reviewing the pension.  (Although that’s only found in the small print at the bottom of the last of 4 pages of blurb.  And they don’t tell me anywhere that actually I could do exactly the same without any help from them, and keep my 5% to boot.)

It may, as I’m sure that the government would argue, be invalid for us to stop people doing as they wish with their own money just because it might not be their most sensible decision.  The right to take decisions must always include the right to take silly ones.  But surely it is an entirely proper political concern to ask whether financial services companies are pushing people in a particular direction in order to take an unnecessary slice off savings which people have taken decades to accumulate? 

It may be that Osborne’s intention from the outset was to benefit his friends in the financial services industry.  Some of them certainly lobbied hard for the decision he took.  But even if we give him the benefit of the doubt on that, and assume that his aim really was to give those with a big enough pension pot to make it worthwhile more freedom on how they use it, he has potentially opened the door to yet another mis-selling scandal, as companies keen to make profits target a wider and wider potential market.  How many people will have lost out before action is taken?