In the recent Prime Ministerial debate the party leaders were asked whether £59 per week was a reasonable pension. Of course it isn’t, agreed the party leaders. But you would not think the parties put pensions very high on their list of priorities from the way that they have been campaigning.
The state pension alone suffers from a number of defects, not least that there are blips in the system that allows unjust scenarios to arise. The system also relies on being topped up by a pension credit, which older people have to apply for. Many do not even know that such a top up is available to them, and even if they do, do not feel comfortable taking a so-called handout from the state.
Brits are bombarded with the message that they should start saving for their retirement as soon as possible, but when they look around at the options available it is easy to understand why less than half of the working population are making any kind of private provision. Poor performance in recent years has been compounded by a mass of red tape to add up to a system that is unattractive and overcomplicated to potential investors.
The government’s Pension Simplification initiative in 2006 failed to produce a system that inspired confidence among the British public. In fact, it could be argued that the most successful thing about the initiative was the introduction of QROPS (Qualifying Recognised Overseas Pension Schemes) which incentivises people to escape the UK.
QROPS allow members of UK pension schemes to transfer their pensions into foreign schemes, without paying UK income tax. Expats can also benefit from the ability to avoid inheritance tax, and take advantage of the flexibility that overseas schemes offer.
With overseas options being so tempting, whichever political party wins will need to have a significant overhaul of retirement savings in the UK to keep savers interested in staying there for their retirement.
