But before we decide that politicians should determine whether our pension funds should be used to finance the next Garden Bridge or whatever, perhaps the tax system could gently encourage our trustees, advisers or discretionary fund mangers to make the right sort of investments.
New innovative companies – the bright young things of tomorrow – need equity finance to take them through the various growth stages of a business.
Then, in the years to come, they will be able to deliver the wealth that will pay good pensions.
The freezing of the LTA back in March 2021 worked directly against that virtuous cycle.
It encouraged all DC pension savers to move their savings into cash or low-return assets in the last few years of work to avoid unwelcome tax bills linked to exceeding the LTA.
Yet clients approaching retirement still have 20 to 30 years of life ahead of them, so they should be able to take a long-term view to investment. They should not be encouraged to move more money into low-growth, "safe" assets.
And yes, this might include investment in so-called illiquid investments like long-term asset funds (just green lit by the Financial Conduct Authority as a permissible asset for DC pensions) and long-term investment for technology and science (Lift) initiative (a government plan to encourage DC pension schemes to invest in small, innovative, research-intensive UK companies).
The chancellor is set to award up to £250m of tax incentives to those developing the Lifts initiative in his November Budget.
Encourage former workers to ‘un-retire’
This is not just for NHS workers, for whom the call was put out early in the pandemic: all sorts of experienced and often senior former employees may find themselves receiving a call asking them to come back to work to lead some project or other.
They need to be encouraged to take these roles up, as the UK, especially since Brexit, has been short of people in all manner of skilled areas.
Independent financial advisers who have sold annuities may already have had awkward conversations with clients un-retiring.
There is simply no facility right now to say, “Hold the annuity payments for a bit, I’ve got a salary again.” It’s an HM Revenue & Customs rule that annuities cannot be surrendered.
So those who do un-retire can find themselves in receipt of both pension payments and salary payments at the same time, thereby being propelled into an uncomfortably high tax bracket.
In DB schemes, such as the NHS, it is fiendishly complicated to return to the job and try and rejoin the pension scheme.
In the DC world, the money purchase annual allowance disincentivises experienced people coming out of a period of retirement (in which they have been drawing on their pension) from topping up their pension if they go back to work.
