Illustrative image: Sources generated with Google Gemini Flash Image 2.5 I don’t know what kind of media you consume (with one rather obvious exception) or whether you watch many rugby matches, but if you do, you might find it virtually impossible to avoid adverts about your pension.
There are so many of them around. And we forget sometimes how big the investment/pensions/preparing for the future business actually is.
It’s also intoxicatingly interesting, because you are trying to do what humans have failed to do since we emerged from the primordial soup.
We’re trying to predict the future. And history is full of people who got that wrong.
I’m sure that, from time to time, you try to consider your pension. How much will you have? How long will you live? What if you have to fund a grandchild’s education?
These are impossible questions. And no family, no matter how healthy and “orthodonted”, looks anything like the perfect families you see in these ads.
I think, for governments, managing pensions must be one of the hardest jobs. For the simple reason that any change you make takes generations to reveal whether it was right or wrong.
And pensions are also immensely complicated. In the UK, a market with much more experience with middle-class pensions than we do, a huge scandal in the Nineties saw possibly two million people losing a fortune.
In fact, what came to be known as the “Pensions Mis-selling scandal” became so big that it was thought that every single actuary who was working in the early 2000s would end up working on it.
And this is why our two-pot system is such a brave policy to implement.
From what I can see, we are the first country to try to implement something like this, where two-thirds of your pension is protected while you can access one-third once a year.
There is probably no better illustration of how desperate so many of our people are that so many with a pension are dipping into their savings pot (the smaller pot) so regularly. And as the tax year has now turned, some financial institutions are reporting that most people who are claiming what they can, did so last year.
Basically, they’re taking the money as soon as they can.
The only thing I find more scary than this is that some people – in fact many – are trying to get out of debt through online gambling.
And if anything scares you anymore, that should.
Now Treasury is considering allowing withdrawals from your pension under conditions of extreme financial distress.
Now, my first thought when I read this was “NO!”
I mean, this could be literally the end of our pension system. It’s obvious that people are in financial distress. No one who is not would be withdrawing from their small pot.
And I’m sure many who are doing this would be able to show that they are in severe financial stress. They know, they must know, that by doing this they are making themselves poorer in later life.
So I can understand the instinct to just say “NO!” to this with the same force with which I tell my children to study for their futures.
But, and I think this is crucially important, it must also be wrong to say to someone: “This is your money, you earned it, but you cannot control it.”
Once we get into that territory, once we start to say, “well, your money is your money but it’s locked up for 40 years, and tough", I think we start to get into a slightly complicated space.
Of course, to a large extent, if you are in formal employment, this has been happening to you already. For a very long time. There are all sorts of rules around pensions and pensions funds. And how you have to have a pension and all of those things.
And frankly, most of the rules are there for good reason – to protect your money, to make sure you don’t, like so many people, have to work into your late seventies.
And considering our unemployment rate, that might actually be a relatively good outcome, because to be out of work, in your seventies and reliant on just R2,400 a month (the current government pension), must be even scarier.
I’m sure the unions and others are putting plenty of pressure on Treasury to ease the current restrictions on accessing your pension pot. If it were me, I would probably suggest that we let the current system bed down a little, to see what happens just over the next five years.
I suppose that won’t help people who have money locked up in their pension and really need it now.
Even so, pension reform is important and involves so much money, s0 should we make changes gently.
We can’t predict the future. Which means we have to be extra-careful when playing with pensions. Whether it’s yours, mine, or anyone else’s. DM