Reform is coming but don’t expect UK-style pension freedom in the near future.
That’s the message from Treasury Minister Eddie Teare, who has poured cold water on calls to match recent changes to the UK’s pension industry.
UK savers aged 55 or above can now access their pension pot and withdraw as much as they like, subject to tax.
But Mr Teare told the Courier that people couldn’t always be trusted to look after their finances and there were no plans to introduce similar legislation in the island.
He said: ‘The evidence in other jurisdictions is that not everybody can be trusted. The risk is that people will fall back on social services. Of course not everybody would do that but the principle of legislation is to protect the majority from the actions of the minority. We have to balance the right of individuals against the potential demand on the public purse.’
Michael MHK Alfred Cannan is introducing proposals to the July Tynwald aimed at giving island residents equal or better pension freedoms than those in the UK.
But Mr Teare said: ‘I think it’s premature. We’d prefer to wait and see how it works out in the UK.
‘It happened in Australia quite a long time ago – it was known as “pension busting”. They’re now having second thoughts as people who took the money ended up spending it and coming back into the welfare system.’
However, he added: ‘I’m quite happy to look again at the top limit. If somebody has a relatively modest fund, say £50,000, I would look at raising the limit of what could be released.
‘We’ll look again in the next budget but I don’t want to raise expectations that we would do away with them altogether.
‘I take the view that if people are given the chance to put money into a tax exempt fund, there have to be some conditions attached to it.’
Mr Teare added that liberalising the system could also strike a blow to the island’s pensions industry.
‘If we allow “pension busting”, some countries will not allow pension funds to be transferred to the island, which could have an adverse effect on the industry,’ he said.
He also revealed that Treasury proposals for wide ranging reform of pensions and benefits will be presented to Tynwald next month.
He said the reforms were likely to prove controversial but gave no more details.