Julian Knight: Why we can’t force people to pay up for their pensions

Making them compulsory will be seen as yet another tax ... and beware the consequences

Think tank the Policy Exchange says it would like to see the Government scrap the right of workers to opt out of workplace pensions. It argues this is the only way to stop millions sleepwalking to an impoverished old age.

Of course we are not saving anywhere near enough – and if you are reading this and think you are then I suggest you go and have a double check – but there is a big leap from there to compelling people to save.

Any attempt to make pension saving compulsory without an opt-out will be seen as another tax. People could be forgiven for wondering why they are being forced to pay when they already have National Insurance.

In addition, it will wipe a huge sum from people’s disposable income – I can imagine scenarios where people get into debt, perhaps even with high-cost credit, because they aren’t bringing home enough money each month because of pension deductions.

And what will this do to the reputation of pensions? You may think they can’t sink much lower but if saving in one becomes compulsory then you could even see protests and disobedience.

Now I have heard many within the pensions industry state it is almost a given that people will eventually be compelled but surely we are missing the point. The best means of changing habits and people’s priorities is through incentive rather than compulsion. The tax breaks are good with a pension but the cost in terms of personal financial freedom are often too great.

With an Individual Savings Account (ISA) you don’t get the upfront tax relief but you do get tax-free growth and can access your funds any time.  If we just freed up pensions in the same way, almost overnight you would transform public perceptions.

Sure people could be auto enrolled into their workplace schemes (which is happening at the moment anyway) but they should have the right to choose to spend the money they have earned on buying a home or feeding their kids.  Let pensions go free and people will start to appreciate them.

Carney’s in a corner

Mark Carney has painted himself into a corner. He has done this by previously stating that he will be looking at an unemployment rate of 7 per cent as the trigger point for a potential rise in interest rates.

Almost from that moment the jobless total has nosedived. So much so that the 7 per cent figure – supposed to be breached at some point next year – is likely to go next month.

If he doesn’t discuss raising rates with the Monetary Policy Committee, the relatively new Bank of England Governor will have to explain to markets why he has abandoned his 7 per cent measure. And central bankers don’t like admitting they are wrong.

Meanwhile, very ironically, the rate of inflation – which was always the key benchmark for the independent Bank of England – has dropped to within limits. In fact, the UK is enjoying the lowest rates of inflation since the financial crisis and to add to this the pound is at a five-year high against the dollar, already hurting exports.

In short everything – unemployment excepted – points firmly  towards rates remaining where they are. To raise rates now would damage the  finances of millions of Britons and potentially kill the recovery. Yet either next month or the month after Mr Carney will have to at least have the conversation with his committee.

The quite startling fall in unemployment makes it much more likely interest rates will rise later this year rather than next. And although this will be good for savers, those who have failed to use the past few years of  artificially low interest rates will  suddenly have to pay a price. It may not be pretty.

Young must help themselves

Like the idea of Help to Buy? Well if you do, credit reference firm Experian warns that many younger people are not thinking enough of boosting their credit score. Basic stuff such as being on the electoral roll is being missed and could stop their Help to Buy ambitions.  But remember it isn’t the only game in town - there are better deals with high loan-to-value available that aren’t under its umbrella .

Independent Partners: 10 top tips for retirement. Get your free guide here

News
Jeremy Clarkson
people
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
    You should judge a person by how they peel a potato

    You should judge a person by how they peel a potato

    Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
    Beige is back: The drab car colours of the 1970s are proving popular again

    Beige to the future

    Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
    Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

    Bill Granger cooks with fresh cheeses

    More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
    Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

    Shay Given: 'This FA Cup run has been wonderful'

    The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
    Timeless drama of Championship race in league of its own - Michael Calvin

    Michael Calvin's Last Word

    Timeless drama of Championship race in league of its own