KEN HOUSTON suggests that expanding the new ‘freedoms’, would enable the Chancellor to start making inroads into the huge public sector pensions deficit…
Talk this Easter was more about nest-eggs than chocolate eggs as a result of the freedom granted to many over-55s to gain full access to their pension pots.
However in one of the innumerable radio phone-ins on the subject, some callers were less enamoured, they being among the millions of state or local government employees to whom the new freedoms will not apply and who will still be required to take an annuity on retirement.
Private sector workers, whose taxes effectively subsidise the gold-plated pensions regime enjoyed by public sector retirees, would probably be forgiven for turning round and saying: “Nah, nah, nah, nah – now you know what it’s like when the boot’s on the other foot”.
Even with the greater flexibility now open to private pensioners, most analysts will say that an index-linked annuity, guaranteed by government, is a much better option than a pension pot (no matter how accessible) that is subject to the vagaries of the market.
However it is possible that, if permitted to do so, many public sector retirees would be tempted to swop their current arrangements for a scheme allowing them to draw down the proceeds of their pension pots as and when they like and for their children or grandchildren to inherit any remaining surplus once they pass on.
Given that the Conservatives, Labour, Liberal-Democrats and SNP have all experienced being in government (either at Westminster or Holyrood) within the past five years, their senior politicians must surely be aware of the huge burden on the Treasury of the public sector pension guarantee. However none have dared address the subject, seeing it as too much of a political hot potato.
But perhaps the most recent change in legislation offers a get-out clause.
This would mean allowing public sector employees to maintain their current pension arrangements or move to a defined contribution scheme. However, the latter would mean giving up the comfort blanket of the State and exposing their funds to the open market, just like the rest of us.
If enough went for the second option – and I’m confident many would – then they would enjoy the new freedoms available to private pensioners while the State could start making inroads into its huge pension deficit.
Has George Osborne missed a trick here?
Or is wider pensions reform – based somewhat on the above premise – part of his intentions should the Conservatives win the election?