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ScotLife tells MPs of pension tests

Scottish Life has set MPs its four pension tests to pass for a simpler system.

The tests, which have been detailed previously in Money Marketing by ScotLife head of pension strategy Steve Bee, aim to ensure changes work to better the system instead of adding complications.

In its response to the Parliamentary work and pensions select committee inquiry, Scottish Life warns that simply creating more rules will not achieve anything.

It says the existing system should be ringfenced and maintained for the 2 per cent of the population who are financially sophisticated and who could extract undue tax benefits from a simpler system. It would then be possible to create a simple system for the remaining 98 per cent of the population.

Any new regulatory framework would have to prove to be at least as good as the best parts of the existing one so those who have contributed to a pension in good faith should find themselves no worse off.

The next test, whichScotLife says is the most important, would need reform to address the question of suitability, avoiding misbuying by those whose savings will not be enough to clear them of state benefits in retirement.

Finally, all three pillars of pension provision – occupational, individual and state – would have to be separate and distinct. This would prevent one of the pillars from imposing limitations on any other.

Bee says: “The plethora of tax rules and regulations act against the interests of those it sets out to help. These rules should be simplified -and retrospectively.”


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