There were reports that the new Investment Bank Tax in Europe and the UK, intended to recover some of the losses incurred as a result of the bank collapse associated with irresponsible lending, will in fact be passed directly on to customers. The Bankers themselves will probably avoid any penalty and the main cost will be borne by Pension Funds and small investors.
This highlights once again how pensions are seen as tax revenue opportunities to be raided whenever possible, regardless that they are meant to provide for the population’s retirement in order to save the State the cost of supporting them at that time, with the resultant alternative burden on the taxpayer.
It also emphasises how unsuitable the conventional pension investment options are becoming, although still offering large potential gains, they are becoming more speculative, uncertain and risky and an attractive honey-pot for predators. Slow but sure can offer a much more stable outcome, as shown in previous blogs.
There is insanity and lack of morality in Banking and Financial Services today, they have lost direction and purpose and become a money-making rather than servicing machine. This is a top down problem, at Branch level, staff are courteous and helpful, intent on good service but with little authority, the rot starts as you go up.
One wonders at the anxiety shown to appease higher management staff with high salaries, bonuses, pensions and perks, yet they made all the mistakes with rash lending, mis-selling etc. which is costing them and the country dear.
This week there were announcements to increase mortgage rates, yet the bank rate stays unchanged and saving rates are pathetic. Current inter-bank rate increases are blamed and cost of borrowing, but this is a nonsense, who is lending to whom and what has changed?
One other aspect is that much of the stock market is being invested in the Far East and South Americas and in fact deprives the UK of large and important economic investment, which could create growth, reduce unemployment and retain hard earned savings within the country.
Such internal investment in infrastructure, housing, energy, transport could offer steady returns of 4 to 6%, which will steadily build to give better pension outcomes than are presently produced in the current system. In addition such returns will be steady and stable, after all we are still living in such investments made by the Victorians.
Pension savings have also been dominated by Tax relief, although an attractive incentive, there is a downside due mainly to the associated bureaucratic rules, regulations and restrictions on realisation. They also cease to exist as savings and lose ownership, being no longer treated as belonging to you and losing the protection now given to personal savings. This can result in excessive charges and even complete loss of pension funds.
An increasing number are putting their money away in Isa’s, taking the advantage of tax free interest returns and at present allowed saving levels can be built up into substantial funds, which can be taken out at any required age; many are putting money in buy to let, servicing loans to build up good Financial portfolios.
Of course such methods lose some of the advantages of pension saving, in particular Employer contributions, although alternatives can be negotiated, such as share distribution or options, which are not solely restricted to the large salaried Directors.
Contracting out of the State second pension was another area that became popular but fund growth was poor giving results less than the state return and is now restricted to large pension schemes. One aspect that is not fully appreciated is the funds can be converted to pension from age 55 with tax free lump sums bypassing State Pension rules.
Of course a good, fair and efficient pension system would eliminate the need for alternate schemes and stabilise pensions, security in retirement, benefitting the economy overall
· Pensions need to breakaway from the “quick buck” mentality
· They need to break the age dependency of the State system
· They need to invest Funds in Britain on Physical and Social structures
This would create jobs and economic growths, giving a solid foundation for future pensioners. Full employment, a balanced economy overseas and a Britain first mentality, an essential part of future survival in the present chaos.
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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