View more on these topics

The pensions of discontent

Pensions remain the most important issue on the financial services policy agenda – and they continue to grow in importance day by day.

Over the past month, we have seen major names, including Maersk, British Airways, Prudential and Scottish Widows, abandoning their own defined-benefit schemes.

The significance of the moves made by the last two companies on this list will not be lost on readers.

We have witnessed amazing scenes outside factories across the UK with workers prepared to man the barr-icades to defend their defined-contribution pension rights – a phenomenon which would have seemed utterly implau-sible only 18 months ago.

There has already been a case of one company backtracking on its decision to shut down its final-salary scheme. Single-issue people power is now being applied to pensions.

The press headlines that the Government might be considering removing higher-rate tax relief on pensions met with the inevitable response.

Both Shadow Chancellor Michael Howard and LibDem Department for Work and Pensions spokesman Steve Webb have latched on to the issue with some gusto. In fact, Webb has turned his comments into a headline of his own: “Pensions overhaul must not be back door to tax raising” says the latest LibDem release on the issue.

He makes this key point: “If the Government decides to press ahead with this, it must not just be a back-door method of increasing revenue. Every penny saved from ending tax breaks should go into boosting pensions for people who do not have one.”

Of course, the Tories continue to make the wider point about Gordon Brown&#39s moves on corporation tax in his 1997 Budget upon entering power – the so-called stealth tax.

Michael Howard&#39s current theme is: “The pensions crisis we face has in part been dir-ectly caused by the Government. If Gordon Brown had not imposed his £5bn a year tax on pensions, pension funds would be far healthier than they are today.”

Eyes are now turning towards the Chancellor&#39s Autumn statement and to the Pensions Green Paper sponsored by the Department for Work and Pensions.

There is worrying conjecture that the Green Paper may not be in evidence for some time. Shortly after the publication of the Pickering review in June, the Government announced the Green Paper would be published in the autumn. We are all well aware that, in Government parlance, “autumn” means any time before December 31 – a comment I overheard from a senior minister at a fringe meeting during this year&#39s Labour conference. So autumn might turn into winter might turn into the New Year.

It appears the occupational pension sector is sending a deluge of evidence to the DWP as part of the Green Paper process and this seems to be considerably slowing the process.

Now there are rumblings from the opposition parties that they will make some political capital if the Green Paper is significantly delayed. However, one of the key things about the details of the Green Paper is the desire for some really new and bold thinking.

If this means we have to wait until the early part of 2003 for the Green Paper, then I do not think that will be a bad thing – both politically or in terms of the policy outcome.

As the Government so comprehensively slid the results of the Pickering review under the table, those of us who follow policy were concerned there might be a complete lack of follow-through on the issues.

However, the longer the Green Paper is delayed, the noises must be good that the Government is going to try and “join up” its approach and deliver fundamental change.

Pension simplification, raising the retirement age to 70, addressing the fundability of the state pension, means-testing and looking at whether the state second pension remains desirable should all hopefully be on the agenda.

For once, I would divert from my usual path of calling for immediate action. The likelihood of getting any legislation on the statute book before 2004 is highly remote. Policymaking is at a critical juncture in this respect.

We all remember how long it took for the Financial Services and Markets Act to pass into law. But most agree the effects of the legislation are starting to show themselves in terms of FSA action on consumer protection in particular.

Let us take a little longer over pensions. The old adage that fast legislation is poor legislation is, I think, very true.

Some people are already talking about pensions – or the lack of provision of them – becoming the poll tax for New Labour. While it is true that the state of the NHS, education and transport have dominated the agenda up until now, none of us would have predicted people would go on strike to defend their pensions at work.

The pension crisis is here. The hope must be that the Government takes the time to consult the industry and consumer – and everyone should take the time to respond to the DWP&#39s Green Paper process. That way, it might, just might, get the solution right.

Iain Anderson is a director and chief corporate counsel at Cicero Consulting


&#39Bonfire&#39 for Fishwick as IFAs get a lifeline on split caps

IFAs will be liable in the split-cap crisis only if they went beyond claims made by trust managers when advising clients, the AITC has told the Treasury select committee inquiry.Aberdeen Asset Management&#39s former head of investment trusts Chris Fishwick denied collusion, saying the firm never invested in another trust on the understanding of receiving future […]

Keydata Investment Services – Dynamic Growth Plan

Tuesday, 29 October 2002 Type: Guaranteed equity bond Aim: Growth linked to the performance of the FTSE 100 index Minimum-maximum investment: £3,000-No maximum Term: Five years Guarantee: Capital returned in full provided the index does not fall by more than 50% Return: Double the growth of the index up to a maximum of 80% Closing […]

Lies, damned lies and statistics

I was interested by Peter Richardson&#39s request to know if anyone has statistics on the money-laundering rules. While I am quite in accord with his views, I would like to bring his attention to the ad that recently ran on television which made it clear that the majority of statistics are made up on the […]

Annuities bouy NU as bond business fall

Business at Norwich Union dipped by 5 per cent in the third quarter this year although with faltering sales of bonds and Isas were substantially made up by increased annuity and group pension sales.Parent Aviva saw worldwide sales rise by 7 per cent to £1.75bn from £1.62bn in equivalent premium income.NU refuses to break down […]

China: growth defence or another debt-fuelled boom?

By Douglas Turnbull, Head of Chinese Equities at Neptune Following recent stimulus efforts from Beijing, Neptune’s Douglas Turnbull examines how the government’s long-term reform agenda can be balanced with supporting growth and addressing structural challenges, and the investment opportunities arising from this.Click here to read more Important information: Investment Risks Neptune funds may have a […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm