One aspect thing of the orphan pot aspect is that someone with income to support it, could make a tax grossed single contribution of £9,999 and then take the lot back out a few days later with no tax implication. Three small similarly sized pots are allowed. 20% growth overnight, and then you get your money back. You have to ask yourself, why would older people consider an ISA when that might be worth taking advice on?
Steve Webb yesterday:
In addition, we will create a new ‘defined ambition’ framework for workplace pensions, enabling new forms of risk sharing between employers and employees.
Defined Ambition (DA) models will affect Defined Benefit (DB) schemes, which could finally start to dissapear completely. The death knell for public sector DB pensions has not yet been rolled out or even chimed, but someone in government will almost certainly be looking around for the brasso just in case it's needed.
Webb's love for collective defined contribution schemes, a la Dutch model, is well known (it is if you're a pension geek). I can't see how DA proposals can support the rape 'n pillage approach announced by Osborne. If the new concept of DA risk is that it is shared intergenerationally, might it be that either the new DC guidance is changed again, possibly in the life of the next Parliament?
Going back to my earlier point, even if DB public sector schemes
do survive, Webb has to make AFPS more affordable. So it might be that he focuses on various discretionary benefits, such as the existing statutory indexation (to put it in context, CPI/RPI bunfight will look like handbags at dawn by comparison), spouse's benefits and an automatic transfer of benefits once you've handed your 1250 (in old money) back and yet more changes to theage that you can take benefits.
I wouldn't be surprised to see an AFPS preserved pension date of a year or two later in life - Webb is already referring to 70 or a 50 year working life as the new average more and more. We are being conditionally, subliminally. After the flash bang of this week and whilst we are used to absolutely nothing now being off the table, what better time to unsheath the velvet blade - whilst we're all still be treated for concussion?
As I write, I realise how clever he is. There is stuff in there that the life insurance companies will gratefully buy into because the effective scrapping of annuities has trashed their share prices this week (not the same as pension fund values being hit). Webb has potentially blown away their previous resistance because they now, somehow, have to face up to the new reality of replacing annuity income.
If the state does hand over the accumulated DB pot to be converted into a new DA, or collective DC scheme where the member shoulders some of the risk, they will have the lost income restored because they'll now be looking after the old DB liability and the state will have shifted its DB liability, brilliant!!!