Over 7,000 names are already on the petition for Alternatively Secured Pension rules intermediary firm Hargreaves Lansdown is looking to pull together by 20 November ahead of the Pre-Budget Report.
Tom McPhail, head of pensions research says his company is looking for as many signatures as possible from both members of the public and intermediaries to press the case the government should not look to perform yet another u-turn in pensions policy.
McPhail says he does not expect the government to scrap ASP altogether, but notes it was this time last year when Gordon Brown performed his notorious u-turn on the taxation of residential property in Sipps.
“Our fear is they’ll do something as similar,” he says.
At heart of the argument, McPhail says, is noise from Ed Balls, economic secretary to the Treasury, about the need for restricting use of ASP to those of a particular faith.
Not only is this reason discriminatory, but the government is missing a trick from not considering how it can align its own interests with those of wealth people in the UK.
Instead of forcing everyone to buy an annuity, allowing wealth people the choice of using ASP would remove their burden on the general annuity pots to which they would otherwise be tied. The pots would be left for those of lesser wealth, but possibly offering better annuity rates.
This argument rests on the statistically proven difference in life spans: wealthy people in Kensington live up to 11 years long than poor people in Glasgow, for example. The effect in terms of annuity figures is for the wealthy to act as a drain on insurance companies’ annuity funds, compared to poorer people who die younger, McPhail says.
Considering also the greater ability of wealthy people to afford exposure to greater investment risk in retirement, and the argument for being able to choose whether to buy an annuity or use ASP becomes even stronger, McPhail says.
Besides these technical arguments there is a broader issue at stake, McPhail continues: if long-term savers feel they have been done over by the government yet again by through a policy u-turn, it risks further damaging already low consumer confidence.
Evidence from Hargreaves Lansdown’s own direct marketing on this issue by email has thrown up response rates above 10%, suggesting, along with verbal comments to its advisers from clients, the government may be facing an increasingly sceptical public when it comes to long-term savings policies.
Hargreaves is aiming for a petition of at least 10,000 names to be forwarded in time to impact on the Pre-Budget Report, the date of which is yet to be confirmed by the Treasury, but expected no later than the first week of December.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
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