The unholy trinity for Pensioners and their money – it’s time to find another way
High inflation, low interest rates and now the so-called granny tax have all conspired over the last few years to make retirement a financial misery for many pensioners. But their plight has been highlighted at last in a report issued this week by the Treasury Select Committee. As well as recognising their predicament, the Treasury Select Committee has made recommendations in this report on the impact of the £325 billion quantitative easing(QE) programme on pensions. They suggest“that the Government consider whether there are any measures that should be taken to mitigate the re-distributional effects of quantitative easing”. By which we hope they mean: - measure just how much savers, and in particular pensioners, have lost and then work out how to compensate them.
It’s totally unacceptable that the distress of savers, especially pensioners, has been ignored for so long, so this report is great news. Sir Mervyn King is aware of the plight of savers, but has been willing to sacrifice them on the altar of economic policy. These are real people who have diligently saved and gone without over the years to ensure that they are not a drain on the State in their retirement. They deserve better. They didn’t cause the problem and don’t deserve to be tossed aside as a disenfranchised underclass of a debt laden society. Let’s hope the Government listens to those who represent savers and takes action to ease this pain.
Not only have savers suffered for years with record low interest rates coupled with high inflation, http://www.moneywise.co.uk/banking-saving/savings-accounts-isas/the-smarter-way-to-save, the Government has also dealt them another terrible blow recently – the so called granny tax . (The announcement in the recent Budget that age allowance is going to be frozen under the guise of simplicity.) However, one man’s simplicity is another man’s daylight robbery and pensioners are not being fooled by George Osborne’s sleight of hand. Why should pensioners see their annual tax allowance frozen, especially when inflation is still relatively high, while those who are generally better off continue to enjoy what most of us consider to be a fair and just tax allowance increase?
The reason that pensioners are so vulnerable is because they are not in a position to replace or increase their income in the same way that those in employment can. They are not in a position to supplement their income by taking on a second or third job and it’s less likely that they would learn new skills or relocate in order to improve job prospects.
Those pensioners who have retired and need to supplement their pension income to survive have to dip into their savings in order to make ends meet. And this means that, even when interest rates rise and the economy recovers, pensioners will have paid a permanent price because their capital has been eroded. So even though economic conditions may improve, their circumstances won’t. They have to find more income out of a smaller capital pot and therefore may be forced to take more risk.
Pensioners are not unionised - they can’t, like some, hold the country to ransom – and they don’t represent the big opportunities for businesses. But that doesn’t mean that they should be ignored.