Once again, the pensions industry finds itself wringing its hands, lamenting the woes of retirees who dared to withdraw their own money without first consulting a product salesperson. Legal & General, among others, have been keen to trumpet research indicating that some pensioners now fret over depleting their funds too quickly. The subtext, of course, is plain: if only these reckless individuals had left their money where it rightfully belongs—in a fee-bearing arrangement from which the industry could extract its generous pound of flesh.
And yet, for all the sanctimonious hand-wringing about the so-called ‘lottery effect’—that irresistible urge to splurge when presented with a lump sum—the industry’s moral panic conveniently omits a rather crucial development. The government, that erstwhile guardian of pension policy, has, with quiet but no less treacherous intent, shattered the fundamental trust upon which the system relied. With its decision in the Autumn Statement to subject unused pension savings to inheritance tax from April 2027, Whitehall has signalled, in no uncertain terms, that pensions are no longer a sacrosanct shelter for prudent savers but merely another convenient revenue stream for a cash-strapped state.
What, then, is truly surprising? That pensioners, long accustomed to successive governments treating their savings as a personal fiefdom to be raided at will, should choose to take their tax-free cash while they still can? That they should, quite rationally, conclude that their pension funds are safer in their own hands than under the fickle stewardship of a government all too willing to renege on its commitments?
The pensions industry, ever the faithful supplicant to state policy, would have us believe that financial ruin is the inevitable fate of those who spurn the wisdom of professional advice. One in seven regret taking their lump sum, they cry. More than half accessed their pension without consulting an adviser, they wail. And yet, curiously absent from this discourse is any reflection on why, exactly, these individuals might have chosen to go it alone. Could it be that trust—eroded by years of opaque fees, shifting policies, and broken promises—has finally collapsed beyond repair?
The government, too, would rather we focus on the spectre of pensioners living beyond their means than on its own role in fostering uncertainty. Ministers, who once extolled the virtues of pensions as an inheritance-friendly wealth preservation tool, now pivot to portraying lump sum withdrawals as the fiscal imprudence of the feckless masses. And so, the stage is set: the pensions industry decries the rashness of savers, while the government quietly pockets the spoils of yet another broken pledge.
There is, of course, a more elegant solution—one that neither the pensions industry nor the Treasury would care to endorse. If trust in pension arrangements is truly the issue, then it falls upon policymakers to cease treating retirement savings as a movable feast for fiscal exigency. Until then, why should any pensioner be expected to behave as though their funds are secure, when history has proven, time and again, that they are anything but?
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