Kim North: Who can save us from pensions complexity?

Kim North

I cannot remember a time when there have been so many changes to the pension landscape. We have complained for years  legislation should be simplified in order to help people understand it, yet levels of complexity are still being added.

New jargon introduced by the pension freedoms, such as UFPLS, now sits on hundreds of websites. It is no wonder advisers are seeing clients that have taken all their cash without realising large income tax bills would be forthcoming.

Frankly, the pension freedoms have made retirement income planning more complicated. So what should we do about it?

Banks and providers need to educate their customers about the perils of later life poverty if they cash in their pension, and technology should be made available for all free of charge to calculate longevity and lifetime cashflow. I also agree with the Financial Inclusion Centre’s Mick McAteer’s recent cry for a non-profit national advice service that complements advisers. The Government’s continual pension raiding through actions such as reducing annual and lifetime allowances could easily pay for this service.

When I read the Government faces a revolt over flat-rate tax relief plans recently announced by Chancellor George Osborne, I want to tell these Tory backbenchers to grow up.

I am a fan of the flat rate of tax relief expected to be set at around 30 per cent for all. After all, how can it be justified that five million people paying higher rate tax get more tax relief than those on lower income tax bands?

The current taxation basis for pensions has been in force for over 90 years, so it is due for a change. Higher rate taxpayers will fund their pension before 16 March if they are sensible.

Another reason I like the idea of a single rate is social responsibility, which means an entity, be it an organisation or individual, has an obligation to act for the benefit of society at large. A single rate pension tax relief introduction would do this.

With micro businesses needing to auto-enrol, the prospect of higher levels of tax relief makes joining the workplace pension scheme more attractive for the 24.5 million or so people that are not higher rate taxpayers. It will also generate a saving of over £2bn to the Government, which could be used to fund the pension advice service McAteer speaks of. As for the blatant discrimination against women born between 6 April 1953 and 5 January 1954 as to when their state pension age is, it is outrageous. The uproar over sex inequality seems entirely justified, considering the fact it does not apply to men.

I have always been a David Bowie fan and would sing along (out of tune) to “we can be heroes, just for one day”. At this moment in time, we really need a pensions hero. Pensions minister Ros Altmann is my favoured candidate and I urge her to stop this discrimination.

Kim North is managing director at Technology and Technical