OPINION: Pension freedoms, Passover and personal responsibility
By Marc Shoffman
April 6 marks what the personal finance industry is hailing as pension freedom day.
This is the first day of a brave new world where the government has allowed retirees unrestricted access to their pension pots, subject to certain taxes.
It is a landmark change which frees pension savers from the shackles of often poor paying annuity products and gives people the choice to spend money they have put away as they please.
It also happens to coincide with the Jewish festival of Passover, which of course celebrates the Jewish people being freed from slavery in Egypt.
There are parallels that have occurred to me between these two events.
As the Jews were leaving Egypt, they had no idea what was ahead, how would they cross the Red Sea, would they ever reach the Land of Israel, and has someone remembered to pack the sandwiches?
No-one could have predicted what would happen in the 40 days and 40 nights of wondering the desert or what would happen once Moses got to Mount Sinai.
People coming up to retirement are now coming up to their own uncertain journey.
The pension changes have been celebrated as a landmark in the way people can spend their retirement.
Previously you would save in a pension and when it came to retirement you could take 25 per cent tax free and then either stay invested in the markets through a drawdown product, or draw an income from an annuity.
Now you can access your pot as you please, taking out 25 per cent tax-free and rest at your marginal rate as many times as you want during retirement.
There are many sectors expected to experience a boost from this. We could see an influx of pensioners snapping up properties and becoming buy-to-let landlords, or maybe they will buy that round the world cruise or dream sports car.
But taking out too much at a time could result in a higher tax bill and ultimately deplete and destroy your retirement income.
This is one of the big concerns about the changes and is where we have to be careful about celebrating too much freedom.
To misquote Spiderman, with great freedom comes great responsibility, and people need to make sure they stay on top of their finances, and perhaps like the wise son, seek some help and ask the right questions.
The same is true of Jews at Passover. We have embraced our freedom and can now freely practise our religion in most parts of the world.
But how much are we taking those freedoms for granted?
There are many aspects of Passover that are by no means free.
Kosher shops hike their prices to questionable levels that leave many priced out. How can oil or yoghurt cost £4?
Everyone complains about a few days without bread or beer, but does all this put us in danger of depleting our own investment in freedom and losing the true message?
As we sit around the Seder table we rejoice through Dayenu that each act G-d has done for us ‘would have been enough.’ But what about our own actions?
Is it enough that we are free and do we have enough belief that support will always be there?
Should there be more responsibility when it comes to our freedoms, for example are we doing enough to support our synagogues or those in poverty or poor health in our own communities and around the world? Should food prices increase way above inflation?
Everybody loves freedom, but whether you are accessing your pension pot or taking your first crunch of matzah, should the real message be that we take responsibility for ourselves and others, before time runs out?
– ‘Marc Shoffman co-presents the Faith and Finance radio show on Share Radio’
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