It feels like positive change is coming at last. We have several moves by government to improve outcomes from pension saving. It has finally been recognised that millions of people (40% of adults according to DWP) will not have enough income in later life, so it makes perfect sense to try to redress this. It all makes perfect sense – better income in later life means less reliance on already stretched state support.
Nothing coming up so far is new of course. We have been saying for years that saving is not enough, that the state pension itself is not enough and that many pension schemes are not good value for money. People are living longer in poor health and people often make wrong decisions at retirement – sometimes with the help of bad actors.
The issue is what to do about it.
The new Pensions Commission - PC2 (we do so love acronyms in this industry) has been sought for many years. We had a good one about 20 years ago and it managed to think outside its remit, and I am hopeful we will get more of the same.
However, and I don’t mean to get all socialist on this, we need to face the reality that people have less disposable income than they had in the past and this has an impact on savings ability. So many people work in the gig economy and so much investment is needed in UK plc that the spare cash to inject into later life saving is simply not there. We also need to note that the gap between earnings for ordinary workers and those for FTSE 100 executives has risen to 120 times (in the US the gap is about 350 times and likely to surge with the Trump BBB). People are also less healthy, for several reasons, and that is a drain on national resources and one that could and should be mitigated. Fixing stuff in pensions can be like squeezing a balloon – the problem isn’t eliminated, it’s just moved. We need to start identifying root causes rather than focusing on symptoms.
Most of the voluntary work I have done in my career has been about preventing poor outcomes, through industry standards on scams, fraud, advice, administration. I have also worked on fixing things that go wrong with over 30 years of disputes mediation with TPAS/TPO as well as 10 years of standing up for pension fraud victims and challenging HMRC, Treasury and the Home Office. There is an old adage that prevention is better than cure, and I completely agree but we don’t live in an ideal world so recovery work is essential.
Despite my best efforts, I’ve not yet succeeded in persuading governments that taxing people who have already lost pension savings to fraud only deepens their financial loss and emotional harm, and further reduces their ability to recover and thrive. The irony that the Treasury gains at a victim’s expense seems to be lost, as does the fact that failing to pursue scammers encourages more scamming. We have become a soft touch.
The New UK Fraud Strategy (UKFS2) is welcome and leaning in the right direction, although it is, so far, a bit quiet on the financial side of victim support. It does however recognise the harm from victim blaming so hat tip to that!
I keep returning to the US in my thoughts, perhaps because I’m not physically going there, and was recently struck by a visit to the UK by my Democrat hero, Congressman Jamie Raskin who spoke powerfully about freedom of speech (ironically being shouted down by one N Farage MP, self-styled champion of the same – oh the irony!) Raskin is my hero for two reasons: firstly, he is a cancer survivor and secondly, he has tabled a bill to improve the lot of fraud victims in the US - The Tax Relief for Victims of Crimes, Scams, and Disasters Act. The US has a tax charge of 10% for anyone who takes money from their 401K savings plan before retirement age – by contrast, we charge our citizens 55%. Rep Raskin has introduced this bill to give tax relief to those who are deceived into taking an action that results in a tax bill.
Raskin said; “When Americans fall victim to dreadful scams at the hands of criminals, fraudsters and hucksters, they shouldn’t be revictimized by the IRS.” Hear, Hear! Some common sense at play.
If only UK politicians would pay attention – perhaps the new Pensions Commission could overstep its boundaries and think about the quirky UK tax law that inadvertently further harms victims of fraud and worsens the savings adequacy crisis.
Margaret Snowdon, Chair – PSIG
