The new pension reforms that David Cameron is bringing in are patently silly, so why is he bothering?
On receiving your pension pot in a lump sum upon reaching retirement the best thing to happen is that you are required by law to invest it in such a way that you are able to receive a monthly income from it, thereby keeping the wolf from the door and not becoming a drain on the national coffers by having to rely on government hand-outs.
Hurrah! The perfect answer to all us common folk as regards financially surviving our retirement.
Unfortunately, it doesn’t work like that because while you are getting along, supporting yourself and being prudent with your monthly pension income, there will be those who blow the lot on a world cruise and then return to Blighty penniless and go in search of benefits and hand-outs because they have no money left.
This new pension scheme is yet another dodge to help those who are already very wealthy to become wealthier still.
You see any money put into a pension scheme is deducted before tax, meaning that you are only taxed on what is left.
And if you can afford to pay a lot of money into a pension pot then you are taxed correspondingly less. The only downside of this is that at the moment you have to eventually make a monthly income of it on retirement, and if you have saved up a large pension pot, then you will also have to pay a lot of tax on that monthly income.
Not any more, because under Cameron’s new rules you don’t have to invest it on a monthly income, in fact you don’t need to spend any of it at all because now you can bank the lot, or take it abroad or buy more houses .
It benefits the rich because their retirement finances are sorted, so is a new way of gaining extra cash.