Thursday, 6 April 2017

Crusty old misery-guts of the day (Ros Altmann edition)...

Doctor Rosalind Miriam Altmann (or Baroness Ros Altmann to her friends) has an inactive FCA registration.  So I'm not sure why she is giving financial advice in the Mail Online, but she is anyway and has joined the ranks of the bitter over 40's who want to get the Lifetime ISA binned because they are miserable about being nearly dead too old to qualify for the free £1,000 per annum.

Apparently she "... worries that young people who open one for any reason other than the short-term goal of buying a home will blight their finances for their whole lives."  Heavy stuff?  Well the ex-pensions minister claims "...using this as a pension has significant dangers you may not be aware of" and that the LISA "... is a complex product which could leave millions of young people poorer in retirement."

As per usual, Ros claims that the under 40's are too thick to understand they will lose any employer contribution if they opt out of workplace schemes in favour of the LISA.  Whilst she claims to support the Help to Buy ISA, she hypocritically states that young people desperate to buy property will shun pensions saving in order to save a deposit.  But this is only the start of the doublethink.

You see LISA's will hurt high rate taxpayers under 40.  Too stupid to work out that a 40% tax rebate is more than a 20% bonus, in the world according to Ros, the top earning 15% or so of the population will save in the wrong product.  But then again LISA's will only benefit the rich.  Because the basic rate taxpayers who can afford to use a LISA (with its minimum £25 a month contribution) after paying into an occupational pension scheme are rich aren't they?  Or God Forbid! people's parents will give them money.

The usual guff about the 25% penalty for early withdrawal(*) is trotted out too.  But the best bit, the real icing on the cake is this beauty:

"...pensions are taxable on withdrawals beyond the 25 per cent tax-free lump sum in later life. This deters people from spending the money too soon, which is the right behavioural incentive.
The incentive with a Lifetime Isa will be to take all the money out around age 60, and have nothing left for your 80s - in other words, the features of the Lifetime Isa mean it is designed NOT to last a lifetime."

Yes, the fact that for a basic rate taxpayer, LISAs are tax free on the way in AND on the way out is a disadvantage of the product!  Well I opened mine with Hargreaves Lansdown this morning and I'd encourage anyone else under 40 to do the same thing.

The banksters probably want get the policy binned in favour of more direct subsidies like Help to Buy where bonuses are only paid when the punter takes out a bank loan.  Whilst miserable old gits like Ros would quite simply rather the money was spent on people over 40 like themselves.

Of course the other drawback for the establishment is that if young people start paying attention to global financial markets, they might notice things like UK house prices being flat to down in all other major currencies over the last decade. Or that the US stock market has returned 250% since April 2007 in pounds sterling terms - yes, 250% even if you invested before the crash.  And we can't have that can we?  Who will buy all the overpriced houses from coffin-dodgers like Ros?

(*)pensions have a much greater 55% penalty for early withdrawal and £billions has been lost to pensions liberation scams because the government are too crap to regulate the pensions industry, but HMRC do still send the 55% bill to the fraud victim.


Mark Wadsworth said...

LISA is a load of Homey shite, but if her objections are "it will hurt the rich" "it will hurt the poor" " it will hurt the young" and "it will hurt the over-40s" sound like Killer Arguments Against, to me.

Steven_L said...

Homey shite or otherwise, it's obviously a better product for a basic rate taxpayer than a 2nd pension. It's tax free on the way in like a SIPP and the way out like an ISA. But there is a big campaign going on to say it is worse than a pension and dangerous and should be binned.

Mark Wadsworth said...

SL, yes, for a lot of people it's clearly best of both worlds. Still Homey white.

Mark Wadsworth said...


Rich Tee said...

Seems like age discrimination to me. Under the Equality Act 2010, a private business mustn't treat any customer unfavourably because of their age.

How am I supposed to take a government seriously if it directly violates the principle of its own legislation?

Lola said...

Yes, the LISA is a 'no brainer'. Quite honestly it's a gift - but if you choose the wrong one the bulk of the tax breaks will be gobbled up by the provider.

And if it becomes the deposit funder of choice for homebuyers all those tax breaks will go into land rents.

Personally, and I work in this business, I just wish they'd shut down all these boondoggles - LISA, Help to Buy ISA, Junior ISA, EIS, VCT, funds that exploit BPR for IHT planning, etc. etc. and restrict contribution tax relief on pension to the basic rate. The only one I'd keep would be the basic ISA. Not for the tax breaks, but because it simplifies everything. And simplification always saves money.

mombers said...

@RT The list of age discrimination crimes that the government commits is long. Higher tax rates on the under 65s. Free bus passes. TV licences. Free money aka state pension or tax credit, etc.

Steven_L said...

if it becomes the deposit funder of choice for homebuyers

I think it'll be a long time before 'young savers' can outbid 'bank of mum and dad'.