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Happy Pensions day!


I’m trying to be fair, really I am. I’m attempting to consider the government line – that the change in pension flexibility, coming in today, which allows those over 55 to withdraw money from their pension pot as and when they see fit is a sensible policy, designed to help trustworthy consumers take charge of their own finances. That’s what Osborne says it is. And if you squint hard enough, it can indeed look like that.

And yet, and yet...we are told we are in the midst of an economic recovery, and certainly GDP growth seems to reflect that (the heady heights of 2%, people). However, the rebalancing of the economy which was trumpeted by Gorgeous George was predicated ion the idea of growing the manufacturing base, ramping up exports, making us a nation of makers, in his phrase. Get the British making stuff, sell it to other people, take their money. That’s how the recovery was supposed to work.
Except exports have, in fact, fallen. And whilst manufacturing has increased slightly, capital investment in business has, you guessed it, fallen. To be precise, falling at a faster rate than it has for six years. Just ask the office for National Statistics.

So the recovery, it can be deduced is largely predicated upon consumer spending. Help to buy has helped to inflate the housing market yet further (those who are capable of remembering a whole seven years back will recall that it was an overheated housing market which helped get us in this mess). So the recovery is driven by mortgages, by debt, in other words. And what happens when you have an economy fuelled by debt? Can anyone remember?

So bearing that in mind, it suddenly becomes hard to see this pensions reform as anything other than a desperate attempt to unlock some capital and get it sloshing around the economy to give it a quick consumer-based boost. It’s even been suggested that pensioners may wish to buy a buy-to-let property. You remember that, right? That thing which was a massive driver of an overinflated housing market in the first place?

Now, I’m not for a second suggesting that everyone’s going to rush out and do that, I imagine the vast majority will sensibly hang on. But the whole thing smacks of a hope of short-term gain against longer term structure, which, for Osborne, would be pretty much true to form.

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