Thursday, 20 March 2014

Carpe diem

Honestly. What a hoo-ha over the Budget proposal to let people reaching retirement age spend their personal pension scheme fund exactly as they wish, rather than buy an annuity with it! In other words, to have a choice. And why not? If I were approaching retirement, I'd be dismayed at having to sink the entire amount of my pension pot into something that would generate so little income. I heard of some such miserable figure as a pension of £150 a month from a pension fund of £30,000. That £150 isn't going to go very far. Whereas £30,000 (quite a handy lump sum) can be used to set one's home up for extreme old age, surely a very sensible use of the money. So much better than an annuity that covered the cost of one glum visit to ASDA each week, but no more.

The fuss is about the improvident folk who will be tempted to squander their £30,000 on silly things. And then, having had their self-indulgent spree, will look to the State to support them.

Personally, I would say that such irresponsible people are unlikely to build up a pension fund worth the name, and will therefore not find themselves in any position of temptation. I am talking about the 'carpe diem' types whose notion of 'planning ahead' is to count on winning top prize in the National Lottery. They are not the sort to adopt a sensible savings plan, stick with it through good times and bad, and ultimately find themselves with a decent sum to add cheer to their closing years.

The ones with pension pots worth spending are the far-sighted ones who looked ahead long ago, and made their plans. They are not the sort to recklessly fritter their savings away.

One thing I have noticed, though, is that once one is old enough to tire easily, or to have mobility issues, then a final stage of sitting around at home watching golf or antiques programmes sets in. You go nowhere, eat sparingly, buy next to nothing - and cash rapidly accumulates in one's accounts. I saw this happen with my parents. If inactive, it's possible to live comfortably on much less than you think. It's while you are active and energetic and full of unrealised ambitions that you need cash in bucketloads - which is an argument for adopting a modified 'carpe diem' stance in the years immediately after retirement. Modified, because you do assume a future life, and you work out what you'll need for it. You must keep that in hand, but use the rest of your resources to buy experiences - and fun - while you are in a fit state to enjoy it all. I believe that anyone who can plan for Old Age should be trusted with the unfettered use of their pension pot - and not be nannied.

4 comments:

  1. I agree Lucy. There is however much merit in saving something for a rainy day, a cushion if you will that can be used for unforeseen problems. At the same time I feel one should enjoy ones life and splash out too! A fine balance between the two I think is the wiser choice. I was fortunate to have been in employers pension schemes (3 of them) where the accumulated credits were passed on to each making the final pot a single one and substantial enough to provide a monthly income.
    Shirley Anne x

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  2. I thought that you were on holiday - does that not include the Blog?

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  3. Oh no, the blog carries on, provided I have time for it and Wi-fi or a mobile phone signal! No reprieve for my readers.

    Lucy

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  4. What concerns me is that as the notion of pension pots being sacrosanct, gets eroded the temptation to tax them for pet schemes becomes ever more tempting for our politicians. I wonder whether the.prudent will end up saving for themselves and strangers - in effect supporting the feckless

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Lucy Melford