ACCORDING to Gore Vidal, who died this week, “I told you so” are “the four most beautiful words in our common language”.
They are also four of the most infuriating words in our language, but sometimes it’s hard to resist saying them, particularly under our inept coalition government.
Take its child savings initiative, for example.
When junior individual savings accounts were introduced last November they came with flaws big enough to undermine the whole concept. And while it’s early days yet, fears that the success of Jisas – ostensibly the replacement for child trust funds (CTFs) – would be hindered by those flaws appear to have been realised.
Just 72,000 accounts were opened in the first five months of the scheme, HM Revenue & Customs has revealed. Some £116 million has been invested in them, at an average of £1,600 per account, suggesting take-up has been strongest among those already in the savings habit.
Why haven’t they been more popular? That there is no government payment into Jisas, unlike CTFS, is one factor.
But the real answer lies in a quite ridiculous restriction that the government placed on the accounts. For no real reason it decided that parents who had taken out CTFs – scrapped by the government last year – would not be allowed to open a Jisa.
That effectively means no child born between 2002 and 2011 is eligible for a Jisa, because they qualified for a CTF.
So those parents who had taken out a CTF to put money aside for their child are rewarded by being trapped in a market where the savings and investments on offer are increasingly uncompetitive. Why would savings providers pay decent rates on accounts that are no longer open to new business?
The other disincentive to opening a Jisa is also very easily avoidable. One lesson from the CTF experience was that parents are uncomfortable with putting money into an account that passes automatically to the beneficiary at maturity. With other child savings products offering various degrees of control over the money, the failure to meet that need in Jisas is inexplicable.
Such limitations are easily overcome. The government has shown no inclination to review the product rules for all its fondness for u-turns, but like so many ill-conceived policies, Jisas must be rethought if they are to succeed.
OUR disposable incomes are at the lowest level for nine years, the Office for National Statistics revealed this week. Rising prices are one reason, not least the dramatic increase in energy and fuel costs in recent years.
That is compounded by pay freezes that have seen average wage increases fall well short of inflation.
So why would most of us turn down the offer of free money from our employers? It sounds unlikely, but that’s what effectively happens when you reject the chance to have your employer contribute to your pension.
Almost six in ten people quizzed by actuaries Hymans Robertson said they would turn down a 10 per cent pension contribution increase from their employer in favour of a smaller but immediate cash injection.
Respondents were given a choice between extra pension contributions of 10 per cent a year, contributions to a savings vehicle at 7.5 per cent a year, a 5 per cent pay rise or share options.
Just 42 per cent opted for the 10 per cent pension offer – a contribution that, when compounded over the long-term, could boost the eventual pensions pot significantly.
A 5 per cent pay rise was the most appealing idea for 28 per cent, while 21 per cent would go for the savings contributions and 9 per cent for share options.
In other words, the majority would reject the most generous offer.
The income squeeze highlighted by the ONS is clearly a factor in that. But it speaks more about a profound lack of faith in pensions.
It doesn’t augur well for the big reforms come into force in October.
That’s when employers will start automatically enrolling workers either into their existing pension, or into a new government scheme designed for the purpose.
Up to ten million people will be saving into a pension for the first time as a result. But they are allowed to opt out – and the closer we get to the launch of what has the potential to be a game-changer for pensions, fears are growing over the possible scale of the opt outs.