Ian Cowie

INVESTMENT SPECIAL: Grey rights

Pensioners are at last to be treated like adults

Like sinister Siamese twins, the words ‘pension’ and ‘scandal’ seem to have become joined at the hip. So perhaps it is no surprise that some very good news — perhaps the coalition’s most important extension of choice during its first year — was largely ignored by the media last month.

Most people these days are deeply suspicious of all forms of pension scheme — and rightly so. Traditional insurance company funds have a reputation for high costs and low returns, with far too much of savers’ money sticking to the salesman’s shovel. Company schemes are being slashed as firms concentrate on surviving rather than worrying about their former employees’ old age.

At the same time, the great Ponzi schemes of unfunded state and public-sector pensions are unravelling, as politicians seek to reduce the cost to taxpayers by raising retirement ages and changing the way indexation is calculated. Breaking links with the Retail Prices Index and switching instead to the consistently lower Consumer Prices Index may sound like a technicality, but this will reduce benefits paid to pensioners by billions of pounds in the years ahead.

No wonder editors think all news about pensions is most likely to be bad news, and cynicism abounds. Unfortunately, while any fool can opt out of saving, it is much more difficult to opt out of growing old. So it is just as well that — despite fierce opposition from HM Revenue & Customs — the government has dismantled one of the main barriers deterring people from funding their retirement properly.

Savers can now enjoy much greater choice about how they spend their pension funds since the old requirement to use at least three quarters of the money to buy a guaranteed income for life — compulsory annuitisation — was scrapped last month.

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