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A-Day set to bring significant structural changes

In my experience, it is better to treat pension technical issues with light rather than heat.

In this spirit, I make the follow- ing points about structural change to existing pension arrangements before A-Day.

These legislative changes are the most fundamental and wide-ranging that I can remember in almost 33 years in pensions.

This means that every existing pension arrangement needs to be reviewed – and fast.

This does not mean that there will be structural change in every case but in many cases that will be the logical outcome.

In the particular case of possible transfers to s32 contracts, the key question to ask is: are clients with tax-free cash greater than 25 per cent happy for the long term where they are?

If the answer is no, there are two ways to tackle this. One possibility is a block transfer after A-Day, involving at least two people moving their pensions from the same place to the same place on the same day. That will require careful choreography, including the willingness of two people to behave precisely in this way.

The other is moving before A-Day to another vehicle in the occupational pension regime. By process of elimination, in most cases, that other vehicle will be a s32.

In the case of one-person arrangements, such as existing s32s, where the client is unhappy, a block transfer is a contradiction in terms.

In the case of executive personal pensions, where the clients are also the trustees, they need to under- stand the onerous new responsibilities that they are going to take on by default, especially the scheme administrator role as recently defined. If they are not happy about that, they need to plan now what they are going to do about it.

There is an enormous job for pension advisers and providers to do bet- ween now and A-Day. Let us get on with it.

Stewart Ritchie Director (pensions development),

Scottish Equitable


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