Born to Be Wise

Richard Harvey says the Chancellor is finally treating us like grown-ups. Now all we have to do is act that way.

The problem with motorcycle leathers is that they’re so unforgiving. I’ve been having great trouble in trying to squeeze my 15-stone frame (at least five of which seem to have migrated waist-wards) into a brand new set of biker buckskins, complete with lime green thunder-flash stripes.

Teamed with buckled boots and a cool black full-face helmet (the sort favoured by philandering French presidents), I’m now fully kitted out to board my dream purchase – seventeen grand’s worth of Harley-Davidson Heritage Classic. (Think ‘Easy Rider’ for the Phyllosan generation).

At least, that’s the fantasy that fleetingly crossed my mind when Generous George announced that instead of the state telling me how to spend my pension pot, from next year he was going to let me loose with the lolly. All of it.

As is the way with politicians, a fellow minister duly put his foot in it, saying it was now perfectly OK for pensioners to blow their savings by buying a Lamborghini if they so wished.

Now, a Lambo is not really my style, although I’ve long harboured a fancy for headin’ down the highway on a Harley, with Steppenwolf’s “Born To Be Wild” blasting through the headphones.

On the Other Hand….

But that’s where commonsense kicks in. I know I’ll look like an overstuffed bratwurst in biker leathers, and if I so much as hoist a leg over a motorbike, I’ll fall off. End of fantasy.

Instead, I’ll sit back and watch how insurance companies and financial providers come up with products offering better returns – and it would be difficult for them to produce worse ones – than the annuities with which pensioners have been lumbered for years.

Some reckon that as many as nine out of every 10 savers who would normally have bought an annuity will now hold off. And, frankly, it’s difficult to shed too many tears for annuity providers, even though the threat of their demise would have wider and unwelcome ramifications.

Naturally, there are doomsters forecasting that pensioners will splurge their way through their savings, frittering them on sports cars, luxury cruises and facelifts. And then throw themselves on the mercy of the state, pleading poverty and seeking means-tested benefits.

Now, as a financial seer, I have a lousy track record. For instance, I forecast  that most young people would ignore the opportunity to make salary contributions into the new generation of workplace pensions. Wrong – it appears that the vast majority are putting money aside, realising that a few riotous nights on the thrash are outweighed by the prospect of an impoverished old age.

However, those of us of a certain vintage (i.e. who can remember Max Bygraves, penny chews and The Beano) are surely more likely to be cautious, and more conscious that it would be loopy to blow the pension pot, given the time, sweat and sacrifice taken to build it up in the first place.

Which is surely good news for IFAs, who will be able to demonstrate clearly over the longer term how their fees have been justified by investment gains. While the Chancellor has even suggested that he will put £20 million aside over the next couple of years for face-to-face advice.

It could also presage a boost for the property market. Financial expert Martin Lewis, for instance, believes that many will invest in a buy-to-let property to generate capital growth or income.

However, he also argues that liberating pension pots might lead to confusion among less sophisticated savers – those who perhaps might have bought an annuity from their pension provider instead of shopping around – as new investment and savings plans flood onto the market.

But it’s unarguable that, after decades of forcing elderly people into annuities paying lousy returns – and none at all if the Grim Reaper comes calling –   George Osborne has to be applauded for treating pensioners as fully-formed adults, perfectly capable of making their own financial decisions