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FCA concerns over George Osborne's pension freedom reforms

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Giving people more freedom over how they spend their retirement savings was one of the boldest things George Osborne did as Chancellor.

However, two years on from Mr Osborne's pension reforms, the UK's main financial regulator has flagged its concerns about the new arrangements.

Publishing the first major comprehensive study into the impact of the reforms on the retirement income market, the Financial Conduct Authority warns consumers are not shopping around sufficiently and are not taking enough advice when accessing their pension pots.

It also warns that some may be paying too much tax as a result of their decisions. It may now have to step in to help save consumers from themselves.

 

The watchdog notes more than one million pension pots have been accessed by savers since the reforms were introduced in 2015, with more than half of the pension pots emptied entirely.

 

Perhaps the most damning assessment from the FCA is its warning that too many people may be paying too much tax after accessing their pension pot.

When the new freedoms were unveiled, it was not pointed out often enough that those people cashing in their pension pot may only take out a quarter of the money on a tax free basis.

To that end, "pension freedoms" looked like a cynical move by the former Chancellor to extract tax on a stealthy basis, dressed up as a consumer-friendly measure.

The report by the FCA does nothing to remove that suspicion.

https://uk.finance.yahoo.com/news/why-concerns-over-george-osbornes-122100998.html

 

 

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3 minutes ago, TheCountOfNowhere said:

Osborne was a disaster for Britain...great for house prices tho !!!!  His included !!!!

Osbanker and his Chief of Staff Rupert Harrison both gain lucrative jobs at Blackrock who said they were best placed to make the most of the pension reforms

https://www.theguardian.com/politics/2017/mar/10/george-osborne-tory-architect-austerity-banks-1m-pounds

All within the rules of course. 

Quote

'There is far too much cosying up to banks. It is as if BlackRock had taken shares in the Treasury.'

http://www.dailymail.co.uk/news/article-4162438/Heads-roll-Osborne-storm.html#ixzz4mcifzFcn 

 

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Giving people more freedom over how they spend their retirement savings was one of the boldest most self serving things George Osborne did as Chancellor.

 

That's not to say that many people didn't like the idea to try to avoid even more pension thievery but it was yet another policy bereft of ideas for the general economy.

Edited by billybong

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The pension freedoms were a big reason behind me putting every penny I can into a SIPP, then extract it at a much lower marginal rate in future (65% down to 15%).   Before that, flexible drawdown was the best option but it took a big £ pile to get there.  Thank you George.

It appears that temptation is leading other people to put in a basic rate, then pull out lots in one go at higher rate.. daft.

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For me this reform is great.

 

I am ploughing the max £40K a year into a pension getting 40% relief and will take out a 25% tax free lump sum at 55 to hopefully pay off a mortgage (assuming i ever buy)

For me this is easy money really.

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1 hour ago, rantnrave said:

Osborne has a lot to answer for re the mess the UK is in, but he did bring in long overdue reforms to limit BTL.

What a coincidence that it came at a similar time to the pensions freedom? A cynical person might think Blackrock didn't want BTL to look as attractive as investing the money with them?

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1 hour ago, mathschoc said:

Osborne is thick as two planks, he was shoving stuff up his nose whilst studying history at Oxford.

Prof. of Economics though :wacko:

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55 minutes ago, VeryMeanReversion said:

The pension freedoms were a big reason behind me putting every penny I can into a SIPP, then extract it at a much lower marginal rate in future (65% down to 15%).   Before that, flexible drawdown was the best option but it took a big £ pile to get there.  Thank you George.

It appears that temptation is leading other people to put in a basic rate, then pull out lots in one go at higher rate.. daft.

 

49 minutes ago, Quicksilver said:

For me this reform is great.

 

I am ploughing the max £40K a year into a pension getting 40% relief and will take out a 25% tax free lump sum at 55 to hopefully pay off a mortgage (assuming i ever buy)

For me this is easy money really.

The problem with these plans - or any - is the rules are likely to change in the future as well. So nobody really knows what the best plan is.

Just think. In hindsight, the best thing to do in 2000 re. pension planning was to purchase a grotty wee 2 up 2 down terrace in East London for £100k. Rent it out.15 years later ? Spend £30k to do it up.  Live in it for the final 6 months so it's your 'final residence'. Retire with £800k in the bank. Tax free. Job done.

Many people have very fortunately found themselves in this situation - I doubt that even 0.0001% of them actually planned it.

Pure luck.

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30 minutes ago, ccc said:

 

The problem with these plans - or any - is the rules are likely to change in the future as well. So nobody really knows what the best plan is.

Just think. In hindsight, the best thing to do in 2000 re. pension planning was to purchase a grotty wee 2 up 2 down terrace in East London for £100k. Rent it out.15 years later ? Spend £30k to do it up.  Live in it for the final 6 months so it's your 'final residence'. Retire with £800k in the bank. Tax free. Job done.

Many people have very fortunately found themselves in this situation - I doubt that even 0.0001% of them actually planned it.

Pure luck.

There is a saying in Motor Racing. Don't try and predict the weather, be on the right tyres for the current conditions.

You cannot plan for the unknown, and utilizing what is policy today makes sense...until ti doesn't which point you can course correct and adjust.

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1 hour ago, ccc said:

Just think. In hindsight, the best thing to do in 2000 re. pension planning was to purchase a grotty wee 2 up 2 down terrace in East London for £100k. Rent it out.15 years later ? Spend £30k to do it up.  Live in it for the final 6 months so it's your 'final residence'. Retire with £800k in the bank. Tax free. Job done.

Nah, with the benefit of hindsight you can do WAY better than London property.  In October 2000 Apple shares were about $1.20.  Now $145.  Your 100k would have become not 800k but 12 million.  And you don't have to deal with tenants.

Of course the RBS share price in 2000 was £30, now £3, and very nearly zero if the banks had been allowed to fail.

The trouble is without hindsight all we can do is make some educated guesses based on what we know.  Pension rules will change.  Start ups will mushroom, blue chips will collapse.  Diversification and being mindful of the current tax regime both seem sensible.

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1 hour ago, ccc said:

 

The problem with these plans - or any - is the rules are likely to change in the future as well. So nobody really knows what the best plan is.

Just think. In hindsight, the best thing to do in 2000 re. pension planning was to purchase a grotty wee 2 up 2 down terrace in East London for £100k. Rent it out.15 years later ? Spend £30k to do it up.  Live in it for the final 6 months so it's your 'final residence'. Retire with £800k in the bank. Tax free. Job done.

Many people have very fortunately found themselves in this situation - I doubt that even 0.0001% of them actually planned it.

Pure luck.

the Kingdom's rich and powerful have their wealth in land and property...align your interests with theirs and things work out well - pure luck.

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5 hours ago, scottbeard said:

Nah, with the benefit of hindsight you can do WAY better than London property.  In October 2000 Apple shares were about $1.20.  Now $145.  Your 100k would have become not 800k but 12 million.  And you don't have to deal with tenants.

Of course the RBS share price in 2000 was £30, now £3, and very nearly zero if the banks had been allowed to fail.

The trouble is without hindsight all we can do is make some educated guesses based on what we know.  Pension rules will change.  Start ups will mushroom, blue chips will collapse.  Diversification and being mindful of the current tax regime both seem sensible.

Very different example. How many people holding on to those apple shares bought at rock bottom would have had the nerve to stick when they went up 5x then 10x then 20x etc ? Very very very few. If any. 

A house is a different matter though. It's tangible and people think oh well even if it crashes in price we can still live there / our wee Dave can move in after Uni. Etc. 

Anyway - it's all the same principle. Today there is no clear obvious direction of what to do. Hindsight does tell us one thing - it's rarely what people think !

5 hours ago, Wayward said:

the Kingdom's rich and powerful have their wealth in land and property...align your interests with theirs and things work out well - pure luck.

Unfortunately this is true. Crashes still do happen thank ******. 

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I think the pension reform will help hpc as i would hazard, a not insignificance few paid 40% tax and then leveraged up into btl. If interest rates rise, those that resisted will be quids in and some of those that didn't will be broke. 

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