Treasury 'could destroy pensions', warns former Minister

File photo dated 17/04/15 of former pensions minister Baroness Ros Altmann, who has said the Government should provide tax break

Ros Altmann, the former pensions minister, has issued a dire warning that the Treasury could be about to destroy the pensions saving system. She tweeted: "If you care about pensions, be very very worried."

Her concern centres on a new infographic the Treasury has put together to demonstrate the options for saving for the long term. It starts out on the savings 'pathway' with the Child Trust Fund and Junior ISA, before progressing to the Help to Buy ISA, the Lifetime ISA, Premium Bonds, and ISAs.

When it gets to the point of retirement, the guide states: "The Lifetime ISA can also be used to save for retirement. From your 60th birthday you can take out the savings for any purpose."

As Altmann points out, at no point on the pathway does the guide mention pensions. In a subsequent tweet she said: "HM Treasury should be ashamed of a public information campaign that fails to mention the best way to save for later life."

See also: Why 2017 could be the worst year ever for retirees

See also: Retiring in 2017: what you need to know

Why does the Treasury hate pensions?

The problem, Altmann says, is that the Treasury looks at pensions in terms of the amount of money it costs them in tax relief. Because they are so expensive, under George Osborne, the Treasury was trying to mastermind a move away from pensions, and towards ISAs as the country's primary savings vehicle. This, she highlights, overlooks the benefits of pensions entirely.

The Treasury has denied the document is misleading, and says it is a 'snapshot' of the options, rather than an exhaustive list. However, the experts remain unconvinced, with Altmann tweeting: "Of course it's misleading. To talk about ISAs 'and other options' without mentioning pensions is a disgrace.

An alternative theory

Tom McPhail, head of retirement policy at Hargreaves Lansdown, is less convinced there is a plot to kill off pensions. He says: "I think this is a cock up rather than a conspiracy. I don't think the Treasury is deliberately trying to suppress the benefits of pensions. I doubt they sat around a table and said "Let's not tell anyone about pensions". However, it's symptomatic of a failure within government to approach savings policy in a coherent and structured way."

He adds: "The Treasury and the DWP are increasingly pulling in diametrically opposing directions, and the situation requires someone senior to bring together ministers and civil servants from both departments to agree a single coherent policy."

Altmann also blames the failure on a disconnect between the departments. She wrote on her blog: "During my time as Pensions Minister, there was clearly a difference view between Treasury and DWP about private pensions. The Treasury sees them as a cost to the Exchequer. DWP sees them as a benefit for people to give them a better standard of living. That is how most people see them and why they are so important."

What happens next, and whether the days of pensions are numbered, depends to a great extent on the position taken by Chancellor Philip Hammond. McPhail says: " We don't yet know where Philip Hammond sits on all of this. I have had conversations with junior ministers and civil servants and I think we will get a better sense of where he intends to go as the year progresses."

It seems, therefore, that we will have to wait to see whether Altmann's worst fears are realised, and whether the government is set on a path to destroy pensions.

How we spend our pensions
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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to - because while baby boomers know how to have fun - they also know how to save for the future.


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