30th September 2014 at 10:58am
Where were you on 19th March 2014?
I remember exactly where I was – watching television.
The Budget Day speech from the Chancellor had started off in the usual fashion – big numbers about the economy, with anything about tax towards the end.
We weren’t expecting the savings revolution which was unleashed in the later part of the speech. The double whammy of flexible new ISA rules and flexible pension rules combined to make the day one I’ll never forget. And I remember smiling.
How I approach my own savings now reflects this revolution.
In the past, I had focussed more on my ISA savings and keeping an eye on them – that was where I had more choice and control. Now, I think of my pension savings as being in the same ‘category’ as my ISA. The key difference is that I can’t tap into my pension savings until I’m 57 (the age goes up from 55 to 57 for my generation).
That shift in mind set is what makes a pension so much more interesting – I just look at it as a savings pot now. That shift in mind set is what makes a pension so much more interesting – I just look at it as a savings pot now.
Giving myself a 57th birthday present of all the cash in my pension would be a fairly silly thing to do, however, especially from an income tax perspective. And there would be little point in me disinvesting just to sit in cash if interest rates were low and inflation higher. My pension is a pot which needs to last and I imagine I’ll keep it invested for the long term.
But the new flexibility will open up new choices. I’m coming round to seeing my pension as a pot of deferred pay. Later life is now just a phase when I am my own boss and can pay myself what I want, when I want. And I rather like that prospect.
Not everyone will feel the same way about this, however. I imagine we’ll see a variety of responses. Some people won’t want to run their money on a spreadsheet and make all their own decisions. There will be a group of people who will pay a financial adviser to help them manage their own plan – not everyone wants to try and be a tax and financial planning expert themselves. But what about people who just want a regular sum of money to hit their bank account each month without fuss?
This latter group is potentially a big one – and that’s where I see things changing most in the future. I rather suspect many in this group won’t have an ongoing relationship with a financial adviser – they either can’t pay or won’t pay for that that holistic service. And it’s easy to see that people with small savings pots are likely to take them as cash. But there’s a whole group of people who are going to need help. That’s why Standard Life is already looking at how we will support our customers. It’s all eyes on 2015 for how that help is to be made available, in a cost effective and easy-to-access way – watch this space.
This blog and any responses to comments are not financial advice. A pension and an ISA which holds stocks and shares are investments. Their value can go up or down and may be worth less than you paid in.
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