Transcript

JONQUIL LOWE:

The really surprising issue was this change with pensions. So from 2015, instead of having to buy an annuity, which is what most people do with their pension pot, there will be total freedom to take your pension savings when you like and whatever form you like. So you could take it all out as a lump sum, if you wanted-- blow the lot at the start of retirement.

It wouldn't necessarily be terribly sensible, and certainly at the Open University, the personal finance courses that we deliver are all about being savvy with money and understanding long term planning. But what it might do is really put a bomb under the annuity industry, and get the insurance companies to come up with better products for retirement.

INTERVIEWER:

You don't think that the ability to take the whole lot as cash, if you like-- does that not undermine the predicted shortfall in people's pensions?

JONQUIL LOWE:

Yeah. I think it's very curious policy, actually. Because on the one hand, we've got automatic enrollment. The government has said, people-- leave them to themselves.

They don't make wise decisions. They don't save enough for retirement. So let's give them a nudge by automatically enrolling them into workplace pensions.

And then the complete opposite-- they're saying, OK, when it comes to retirement, you are a responsible person. You can make good choices. And we know that people are driven, to some extent, by their emotions. And spending money today is much more attractive than putting it aside for the future, which is kind of uncertain and it's a long way off.

And even the government's own figures-- they show that they're expecting the tax take from taxing pensions to go up in the years covered by their forecast because they are expecting people to draw money out of their pensions earlier and in larger amounts.

INTERVIEWER:

Don't you suppose if you are savvy about it yourself and you do know what you're doing, then it is a good thing?

JONQUIL LOWE:

It is a good thing, yes, up to point. I think what you've got to remember is that when you're planning finances over the long term, you can do everything right, and yet still have a bad outcome. Because there's always uncertainty.

We had the global financial crisis in 2008. There are people going back a bit further, 2000, who saw their pension funds tumble because of the dot com crisis. So just because you've made the sensible decisions, it doesn't mean you're sheltered from risk.

INTERVIEWER:

Finally overall, do you think it's good or bad for the country? Maybe that's an important little question to ask you.

JONQUIL LOWE:

I'd like to sit on the fence on that one because I think the pensions changes are so radical. I'm really worried that 20 years down the line, we're going to have two tier pensioners-- those with the good, defined benefit schemes having a regular income, good pension, and those who've got small pots or have frittered away their pension early in retirement and are actually having to eke out very poor living.

So I just don't know. We'll have to see. The verdict's out on that one.

INTERVIEWER:

Well Jonquil Lowe, thank you very much for your time. It's been a pleasure.

JONQUIL LOWE:

Thank you.