There certainly is a problem with the length and complexity of pension legislation. For instance, the new measures brought out in this year’s Budget to limit higher-rate tax relief on contributions comprise 31 pages. It does not end there, there is further guidance for pension schemes (18 pages), for individuals (28 pages) and a technical guide (a whopping 52 pages). But despite such examples, I do not believe the length of the rules is the ultimate root of the problem.
The second thing to catch my eye was a startling stat – that since 1995 we have had more than 700 pieces of pension legislation. Put another way, that is one per week. Would the FSA want planners changing clients’ retirement plans weekly?
Talking of startling stats and constant changes, how many pensions ministers have we had? I think it is 19 since 1997 but I have lost count. With an election due in less than a year, I expect the body count will rise further and I am certain we have seen far too many changes.
Whatever happened to a Green Paper produced in December 2002 entitled “Simplicity, security and choice: a technical paper”? We had reached a point where everyone was exasperated with having eight different pension regimes running at once. Everything had become horribly messy and confusing – it was a burden on advisers and providers and a turn-off for the public. We needed one set of rules. They needed to be simple and we needed a bit of blue-sky thinking.
Well, I do not need to tell you that all that has been chucked out of the window in the last seven years. I will not detail the rap-sheet here – that is the subject of another article – but we certainly do not have a single set of rules, they are not simple and the blue-sky thinking turned murky grey.
This all leads me to the perpetrators of the crime – politicians. They are not experts in pensions and they are too distracted by their political careers and the need to raise revenue to look after our pensions.
That leads me to another thing – these are our pensions – company pensions provided by employers and personal pensions built up by individuals. They are not politicians’ pensions – there is a different set of rules for them. The state has never really done a great deal for us on pensions. The basic state pension is not sufficient and the means-tested benefits interfere with private provision. What we have got from the state is a degree of tax relief – and let’s not forget that that is our money too – and constantly moving goalposts.
That is why I believe it is time for a pensions policy committee, along the lines of the Bank of England’s monetary policy committee. It should comprise independent experts from the world of pensions. It could publish its minutes and findings for all to see – and it would be accountable.
Politicians would need to set the objectives of the committee – the original aims of simplification would be a good starting point – and the committee could report to Parliament in much the way the governor of the Bank of England does.
The great thing about giving independence to the Bank of England is that it shows it can be done and that it can work. It also provides a precedent to learn from.
I will leave you with a quote from the BBC website from May 6, 1997: “It means the bank will now be freeto decide monetary policy without taking the short-term wishes of politicians into account.”
Not too much of a challenge to adapt that for pensions…it could even fit in a tweet.