To Protect One Another

Tom Watson writes:

The annuities market evolved in the UK as an early example of the state, the individual and the private sector co-operating to protect one another from the everyday risks that we all face.

It’s a deal.

When you pay into a pension the state doesn’t treat that like it does other income or even other savings – it gives you special tax breaks, special rewards and special protections.

Why?

Because in the end, whilst saving for a pension protects you it also protects the wider community. When you’re protected by a pension, that means that the taxpayer doesn’t have to pay out for you in later life.

You get an income when you get to a stage where you don’t want to, or can’t, work anymore. The state gets a population of resilient and independent older people who have provided for themselves. 

It’s of mutual benefit.

David Cameron used to call this a ‘nudge’ policy.

What the Chancellor announced yesterday fundamentally threatens that deal.

It says to the individual – pay into this pot, take the tax breaks and the special protections, then do whatever you want with it later on.

It’s a one-sided charter for tax avoidance that misunderstands why our carefully constructed mixture of the public and the private works for pensioners and works for the UK as a whole.

If there’s no special obligation on pension money – such as the compulsion that you use it to buy an annuity to protect your income and protect tax-payers from having to support you – then why should there be special privileges for pension savings?

People will tell you that ‘it’s your money, you should decide how to spend it’. The whole point is that it just isn’t that simple.

Yes, you paid in. But so did the taxpayer.

And the government has every right, therefore, to ask that you spend it in the manner it was intended when we were stumping up the cash.

George Osborne’s policy will come into effect one month before the next election.  Millions will suddenly be allowed to empty their pension pots.

Of course, most people will be cautious, careful and responsible. But even so, the special deal between the state, the individual and the market will have been eroded.

Massive lump sums will be in the hands of individuals with all the everyday temptations and risk-taking that we all know so well.

And once that money is blown, it will be the wider community that has to pay.

Labour, with its collective values and belief in mutualism, must oppose these proposals at all costs.