Take PPI mis-selling, for example. That was allowed to continue long after financial journalists and some industry insiders had exposed what was going on and called on the regulator to act.
The early days of the credit crunch were similar, covered only in the financial pages until it hit the news headlines seven years ago this weekend, when BNP Paribas reported a “complete evaporation of liquidity” in the market. Suddenly the seemingly arcane stories about sub-prime mortgages and collateralised debt obligations appeared on the front pages too, albeit long after the horse had bolted.
I fear a similar narrative is playing out around the government’s pension reforms. Most people are aware of the UK government’s plans to relax restrictions on access to pension savings next April. But with large chunks of the national media acting as a cheerleader for George Osborne’s latest gamble, the risks are being underplayed. Only when it is too late and pensioners are paying the price will it become clear how reckless Osborne’s actions were.
The sense of the reforms being a disaster in the making grows stronger by the week. Over the past few days, the government has estimated that one in three of those able to take cash out of their pension pot under the new rules will take advantage of the opportunity.
Those 130,000 people will take out a total £26 billion in five years, providing a handy £3.8bn tax boost for the government.
And the chances are that figure will be higher, because very few of those savers will be getting proper advice on the tax implications of raiding their pensions. The Budget announcement may have promised face-to-face, impartial advice for those approaching retirement, but what it meant, it has transpired, was basic guidance over the phone or online that will too often be woefully inadequate.
The outcome will in many cases be hefty tax bills for pensioners unaware that because pension cash is classed as income, they could be dragged into a higher tax bracket.
That’s just one example of the tax confusion that will be created by the reforms. But there’s nothing to worry about, we keep being told, because apparently we’re all capable of taking responsibility for our finances.
The better off you are, the more that applies. At least, that’s the assumption. A flawed one though, unfortunately. Have you seen how many so-called sophisticated, affluent and knowledgeable investors get ripped off by investment scams? And how many people do you know who could work out how to make their pension savings last for as long as they need, factoring in longevity, health, tax and all the other issues that have a habit of complicating matters?
On Friday, the government released figures showing that almost 12 million people are “undersaving” for retirement. The problem is greatest among middle and higher income earners – those who can supposedly take responsibility for their finances.
Entire forests have been felled in the publishing of research exposing the failure of huge swathes of the population to save for retirement. Evidence that the majority of people can be trusted to use their pension cash wisely is, by contrast, conspicuously lacking.