This year looks like being another significant year for pensions and retirement. With a general election due at some point in the next five months, the pensions merrygoround looks like receiving another spin and with billions of pounds needed to be found from somewhere to try and make the Exchequer’s books balance, it would be fair to say that when it comes to any section of Government spending all bets are off. The Conservatives have already said that personal accounts will be reviewed as a priority if they are elected and, although at the time of writing, the sections of Conservative manifesto relating to pensions had not been published, they are also making rumblings about tackling public sector pension costs.
The current Chancellor’s attacks on tax relief for pension contributions for high earners do not come into effect until April 2011 but with the potential for another Budget between now and an election, there could be more bad news for higher-rate taxpayers.
But it is this continual tinkering with the pension system that is behind some of its most serious problems. Someone who knows more about this than most is pension lawyer and former chairman of the NAPF, Robin Ellison. As the man who wrote the first textbook on pension law, he has seen the level of regulation increase exponentially in recent years and says it is time for the system to be properly overhauled.
To add impetus to the drive to reform the UK’s pension system, Ellison has formed a new parliamentary party and he will stand at the next election. He spells out his reasons for standing and the reforms he wishes to see in an interview with Retirement Strategy. The continual tinkering with the pension system is also tackled in this month’s Soapbox as Friends Provident’s James Ward points out why the Chancellor’s changes are so damaging to saving.
However, the most serious and most damaging impact on pension saving this year could come from the FSA’s retail distribution review. The latest update on the RDR, published last December, turned its attention to group personal pensions and with commission on the way out for most other types of investment- related business to prevent advisers simply selling GPPs rather than personal pensions, the FSA has proposed a ban on both commission and factoring for the cost of advice for group schemes.
With the decline of DB schemes and widespread concerns over the low contribution rates of personal accounts, a good-quality GPP is the best chance most people have of building up a decent pension. The industry is sure to be doing all it can to make sure this is one reform that does not come about in 2010.