The Bee Side - A-day dinner time surprise
So we were out to dinner the other night with a bunch of people we knew only slightly, and that meant it all started off with everyone asking what everyone else did for a living. I kicked off with my usual line about being a test pilot, but it eventually came out that I'm involved in pensions.
To be honest it's at that point usually that I notice the people on my left and right begin to talk to the people on their left and right, but this time it was different. The guy sitting on my left was really keen to talk about pensions; and strangely he wasn't like a normal person or anything - he actually knew a fair bit about the subject.
In fact he'd done a lot of reading about the A-day changes in particular as he was pretty keen on taking control of his pension when he reached retirement.
Pretty excited about the whole thing in fact.
To start with he told me he was definitely going to use his pension fund to invest in residential property as he saw himself running a small guest house in Tuscany in his dotage rather than, as he put it, vegetating in front of daytime TV.
He was going on and on about how this would not only be a better use of his time, but a more economic use of his pension savings than buying an annuity with them. His view was that using his retirement pot in this way would not only be generating a worthwhile job for him, but would also create demand in the support services that run alongside small bed and breakfast establishments. In fact, he'd just been reading an economic report he'd found on the internet that said 25% of all Europeans would soon be over the age of 65 and that many of them would need to work on because of the lack of pension provision across the continent. As he said, though, it's all very well saying people will have to work on, but where are the jobs going to come from?
The answer to that, he thought, is staring us in the face; our pension savings will generate the jobs, just as his would by funding his Tuscan B&B. Unfortunately, when I was able to get a word in, I had to tell him that the government had done a U-turn on the property thing and it wouldn't now be possible after all.
He wasn't too happy about that, but said he still thought the alternatively secured pension rules were a good move anyway, so people like him could manage their own affairs without having to buy an annuity. I said I agreed with that, but had to tell him about the U-turn on this as well. He went quiet at that point, but eventually said that if he was left with no other choice than an annuity he'd may as well draw his full tax-free cash and reinvest it in his pension to maximise his income.
It was later on that, when I was explaining the recycling tax rules, he asked me just what it was like to fly a modern jet plane these days...
First published in Pensions Management, February 2007