Why we don’t save
[Re: Our pension system is broken. We must tear it up and start again, Friday]
Thie author’s comparison of Britain’s pension system with Australia’s is interesting and informative. But there are several blocks towards encouraging a savings mindset in Britain. First, there is no safeguard against misappropriation in the future. Secondly, while the state wishes to inflate its way out of debt, it hardly makes sense to save. After income tax on savings income, it will be impossible to find a savings product that beats inflation. Third, while the cost of housing and transport rises faster than wages or inflation, there is an ever smaller hope of any disposable income for saving. Fourth, UK pension fees are high. Other transaction costs on exchange-traded securities are significantly higher than many countries in the EU and particularly higher than the US. Fifth, the latest threat being promoted by some to cap Isas with a lifetime limit of £150,000 highlights just how vulnerable savings and investments within collective schemes or wrappers really are to the fingers of a present or future chancellor. Finally, inheritance tax planning revolves around dis-investment of wealth no later than seven years before death. Those with something left are likely to have consumed that wealth on old age care.
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