Outlook: Pension chaos
Thursday 04 February 1999
MYSTIFIED ABOUT pensions? Anyone planning for their retirement in the past few years would be forgiven for feeling overwhelmed. Just as they start coming to terms with one new assortment of initials and proposals on the pension front, along comes another to confuse them even further.
As if to confirm everyone's belief that pensions are far too complicated for common mortals, the Treasury yesterday published plans for yet another investment "vehicle" we will be allowed to use for our retirement planning.
This so-far unnamed new model (don't call it a Lisa, the bureaucrats hate the term), aims to be more flexible than both the occupational pensions already available from most large employers, and stakeholder pensions, announced in december. Most of us will, however, struggle to see the unique selling proposition.
By giving pooled investments from unit and investment trust funds the same tax breaks as ordinary pension schemes, the Government is hoping to create a new breed of cheap, flexible pension which we will be able to start and stop at will, without heavy charges.
Treasury Ministers seem to hope that by doing so, they will kill off the existing personal pensions system, in which life companies offer expensive products with heavy surrender penalties. The idea is that insurers will be forced to compete on price with more competitive unit and investment trusts.
Nothing wrong with that, it might be said. However, clarity and simplicity are usually the most important thing when it comes to investment, and on this front the new Government doesn't seem to be making much progress. The proposed changes already replicate many features already available elsewhere with personal pensions. The Treasury seems only to be creating more confusion on the pension front. The only really exciting thing about the proposals was the name Lisa - and now they even want to take that away.
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