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Outside Edge: Nick Bamford

Alan Pickering has had an unenviable job to do. He was tasked with making proposals to simplify a complex set of pension rules.

Only time will tell if his proposals achieve this aim. As he stated when interviewed by BBC recently, he and his report might be condemned to the dustbin of history. At a time when pensions can truly be said to be in crisis, the Pickering report provides an opportunity to give consideration to the way forward.

Overall, the objective of Pickering was to make pension planning easier for employers, employees and plan providers. The single most important step will be to replace all existing pension legislation with one single Pensions Act. This is indeed ambitious.

Between 1986 and 2000, there were some 19 acts and a multitude of statutory instruments which set out the regulations for pensions. The danger is that in seeking to simplify, Pickering may well have the opposite effect.

A second danger is that those who have already made their retirement plans may discover that what they had exp-ected to happen will now not take place. That may make things simple but would be fundamentally unfair.

Pickering calls for a stron-ger regulator. Apparently Opra simply failed to do its job properly. He wants a more proactive regulator. Can we honestly believe, basing our experience on 14 years of financial services regulation, that a more pro-active regulator is going to make pensions less complex? Ridiculous. It will, of course, lead to greater complexity, more rules and more regulations. This is not the only evidence in the Pickering report of a lack of joined-up thinking.

Pickering wants immediate vesting. This is to be applau-ded. It seems grossly unfair that an employee with slightly less than two years membership of an employer-sponsored scheme has no legal entitlement to a preserved pension or employer contributions. At least with personal pensions, this has never been a problem. But after this point, Pickering begins to lose the plot. Let&#39s allow employers to reduce the level of accrued benefits from their pension schemes if they choose to do so. Let&#39s remove the requirement to provide survivors benefits from pension funds. You can just see the unions rolling over and letting those two go by, can&#39t you?

Pickering wants to see the abolition of distinction between NI-based benefits and excess. At first reading, that sounds really good but then you realise how the Blair government will spin that.

It will probably be the first step on the slippery road to no tax-free cash lump sums. That is the case with NI-based benefits, isn&#39t it?. If you think I am wrong, just consider what happens to post-April 5, 1997 contracted-out defined benefits on transfer to personal pensions. That&#39s right, they get converted to protected rights.

To be fair to Pickering, some of his suggestions, although lacking detail, sound very positive. Simplification of the relationship between state provision and private provision is very welcome.

The optional removal of GMPs and replacement by a retrospective reference test will be encouraging to some contracted-out defined-benefit schemes. An attempt to make pension transfers easier also seems positive but at the same time, the devil will be in the detail. No one wants a repeat of the last 10 years of reviews.

So, it is easy to be the critic and knock Pickering but what could he have suggested to simplify pensions? There is a whole raft of things he could have said but did not.

Why not do away with the concept of normal and early retirement, for example, definitely do away with the need for annuity purchase from money-purchase plans? Why not abolish the limits on personal contributions to pension funds? Why not make pension funding compulsory for all employees and the self employed, except I thought we already had that and it was called the National Insurance fund.

It may well be that when Pickering was interviewed by the BBC, he came up with the classic self-fulfilling prophesy. It could be that the best place for this report is indeed in the dustbin of history.

Nick Bamford is managing director of Informed Choice


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