This morning a client – a business owner in his mid 50s – told me why he doesn’t put money into his pension.
He has a long term plan. He has identified the figure he wishes to reach by a given age. He had planned to use pensions as a way of getting there. With fingers in several business pies he needs flexibility as he doesn’t have any spare cash now, but he may have lots in a few years time. He therefore planned to catch up in a big way by making significant pension contributions.
Now he cannot achieve his goal due to successive changes in the rules reducing the contribution limits into pensions.
The net result is that he treats what pension he has accumulated like those enemies of Dr Who known as The Silence. When his pension value is not physically placed in front of him he forgets that it even exists.
His rant about not being able to trust Governments is one that I’m sure many advisers have heard before, and not just from business owners. If clients cannot trust politicians not to tinker with pensions, they cannot use pensions to plan for retirement.
Now I realise I could be accused of hypocrisy given that I proposed a radical pension change myself in this article. But the message from this client – and many other – is simple. Please stop messing about with pension rules. Even if they are not perfect, at least we know where we stand.
It’s not only successive Governments that are to blame. How many times in 25 years of watching Government budget announcements have I heard rumours that higher rate relief is going to be abolished? 25 times, that’s how many. Each and every budget.
Who starts these rumours? I’ve always suspected it might be the marketing departments of pension companies, trying to encourage panicky last minute pension contributions. Whoever it is, they seem to be able to cry wolf as many times as they like and the press still treat it as a story worthy of publication.
So here is my clarion call to the Government, to pension providers, commentators, IFAs, marketing departments, financial services industry journalists, personal finance journalists, Jeff Prestridge, myself, Tom McPhail, Uncle Tom Cobley, Ros Altman, and anyone else tempted to call for improvements to pension rules. Let us resist.
In fact, why not go one step further and Government announce that pension rules will not be changed for 10 years. Commit to leaving pensions alone for the foreseeable future, and allow confidence to slowly find its way back into the minds of the public. They – and their advisers – will be able to make long term plans once again without the worry that the goalposts will be moved.