Pensions
We recognise that you may have general comments on the pensions agenda that you wish to share with us. Below you can share views that we will feed into our wider policy agenda in this area. Please share your thoughts on Private Pensions and Pensions Protection on the relevant comment page.
We previously invited comments on regulations relating to State Pensions. These are out of scope of the Red Tape Challenge, and any comments made prior to closure on the comment page will be fed into DWP’s wider better regulation programme. Find the closed State Pension page here.
To comment on Private Pensions, or Pensions Protection – please click on the links below. Visit the main Pension landing page here.
Red Tape Challenge
The Government recently issued a red tape challenge to the pensions industry. Introducing the initiative Steve Webb, the Pensions Minister, said that the presumption is that all pensions regulation will be scrapped unless it can be justified and that regulation that is burdensome out of date or made simpler should be changed. Scrapping even much hated pieces of legislation is a tough call in pensions when so much of the focus is on member protection.
These are my top three.
1. Don’t attempt GMP equalisation.
It has been 20 plus years since the Barber decision and in the absence to date of any specific requirement in UK law to equalise benefits for the effect of GMPs, the prevailing view of the pensions industry has been that there is no clear obligation on trustees to equalise benefits where inequalities arise only from the impact of the contracting-out legislation. Now is not a good time to start down this road.
2. Simplify employer debt legislation.
Since the introduction of flexible apportionment arrangements in January this year, there are now 7 ways in which debts can be managed. We accept that the key principles of employer debt must stay but a simplification of the Regulations is long overdue.
3. Withstand Solvency II.
Despite a quarter of attendees at a recent debate on the issue voting that treating pensions schemes like insurance companies (under Solvency II style capital and funding requirements) may be no bad thing, that left 75% voting with Sackers’ senior partner, Ian Pittaway, in opposition of the motion. The figures speak for themselves and the idea has been universally decried by the responses to consultation. Latest indications are that the timetable for implementation has slipped but many will be hoping it’s slipped right off the agenda.Comment Tags: employer debt, GMPs, Law, Pensions, section 75, solvency II
Items which could be simplified.
there are many large issues that most other respondents will cover, but here are a few less well-known ones that we have identified.
Pension Sharing/earmarking
Earmarking
Earmarking was introduced by the pensions Act 1995 and because it had limitations Pension Sharing was introduced by the Welfare reform and pensions Act 1999 from December 2000. Earmarking orders are few and far between and the concept is no longer necessary. While appreciating existing Earmarking Orders will need to be implemented in due course, the option to earmark in the future is unnecessary and could be abolished.
Time limit for producing information
We have implemented a pension sharing order this week which was made in 2003. The ex-spouse has refused to supply details of an external arrangement or her National Insurance number or to pay her costs in 9 years. I would like to say this is unusual but sadly it is not. Divorce lawyers get their clients to obtain pension sharing orders and we regularly come across cases where obtaining information from the ex-spouse is extremely difficult and can take years.
Under section 28(7) of the Welfare Reform and Pensions Act 1999 where a pension sharing order is made in Scotland it shall be deemed never to have taken effect if the trustees do not receive within a two month period copies of the relevant documents and statutory information. The ex-spouse can go back to the Sherriff for an extension to this time limit and I have never known an extension refused. However the time limit does focus the ex-spouses mind on producing information and if he/she fails to do so means the trustees can ignore the order until and unless an extension is granted. The imposition of a time limit (and it does not matter if its 2 months or 6 months) would greatly assist administrators of pension schemes.
it causes difficulties by having separate provisions for England and Wales, Scotland and Northern Ireland, depending upon where the divorce takes place.
Auto enrolment and fixed protection/enhanced protection.
Accruing further benefits in a pension scheme will mean a member with fixed or enhanced protection loses that protection. Individuals with such protection have obviously built up large pension pots and will not be poor in retirement. Forcibly auto enrolling such individuals and leaving it to them to opt-out in time to prevent loss of enhanced or fixed protection is a waste of time and nonsense. There should be an exception to the auto enrolment requirements where a member has informed an employer in writing that he/she has fixed or enhanced protection.
Abolition of contracting out for DB Schemes
An opportunity exists for the Government to abolish contracting out for DB Schemes. Existing contracted out liability could be bought back into the state scheme. This would mean a one off cash injection for the Government with the liability being paid out over the next 50 years or more (much the same as the recent post Office transfer). For pension schemes it would simplify their administration and remove the need to equalise GMPs.
It would also make the introduction of the £140 per week universal state pension a lot simpler and mean the civil servants at NICO in Newcastle could be redeployed to other activities.
Disclosure
We note the idea of consolidating disclosure requirements which currently occur in numerous pieces of legislation has been delayed until at least 2013. Consolidating the requirements would make administering pension schemes easier and identify requirements which are no longer necessary. In addition where statutory time limits are set it would be helpful if it could be indicated that adhering to these requirements means that trustees are not guilty of maladministration to remove the uncertainty a couple of recent Ombudsman decisions have introduced.Comment Tags: auto enrolment, contracting out, disclosure, pension sharing
The current paperwork on understanding the rules and regulation is way too much, part of this is quite complicated to read. If for example you want to find one piece of information on the RPSM, you need to go through all the pages before you find the information. A change on the layout of th RPSM will be helpful.
Give ‘ownership’ of a defined contribution pension fund to the employee once s/he leaves employment with the company which set it up.
Currently a defined contribution pension fund continues to owned by and under the control of its trustees even though the company which set it up may have been bought, moved to he USA, bought again and moved to ahe Netherlands. Ten year later it may no longer be possible to find the trustees or get a response from them. This all requires considerable regulatory expense to resolve and could be avoided by placing the part of the fund applicable to the ex-employee in her hands. There could be merit in restricting access to the fund before retirement age.Comment Tags: defined contribution, tustees
Ive been working grueling hours and its infinite.
we regularly complete open market option and annuity purchase applications for clients – most of whom are well belwo the liftime allowance. However most of the forms are very lengthy and aks lots of questions which are irrelevant for people with modest pension funds – why not remove the requirement for these lenghty froms for people with total pension funds, of, say, less than 1 million pounds?Comment Tags: lifetime allowance forms red tape
The lifetime allowance makes it essential to monitor the value of accumulated pensions, causes additional tiers of checks when transfers are done and when benefits are crystallised. It also causes uncertainty in the eyes of those who have pension funds at or near the LTA.
All this could be avoided by removing any controls on the size of a personal pension fund and limiting the amount of allowable contributions that can be made. This could either be done with a return to age related contributions or by a restriction on the tax relief given on personal contributions each year.Comment Tags: Lifetime allowance to be abolished
There is apparently a lot to identify about this. I assume you made certain good points in features also.
You did ask . . . first a short summary, then the real thing if you want to read on . . .
Please:
- lighten the financial load on companies whose long standing final salary schemes have become much more expensive, retrospectively, and who currently have to carry that full load alone.
- pension schemes have more than enough troubles to keep them going for the foreseeable future. Please drop GMP equalisation – even drop GMPs all together.
- please turn back from going down the road towards de-natured, “gender neutral” annuity rates. Apart from flying in the face of everything we know to be true, it also seeks to change reality and that, as we have seen with Barber, leads to endless, unproductive distractions from and interference with the job in hand which is to provide income for pensioners. There are too many pitfalls.
With more explanation:
1. “COST OF PENSIONS”. People are living longer so Pensions are becoming more expensive. If you are building up a cash fund that will not now sustain the pension you had hoped for then you can plough more money in to your fund – if you can afford to and choose to do so. If you are an employer who, many years ago promised your employees a salary related pension and has seen the cost of that pension escalate, in effect retrospectively, you are given no choice but to plough money into the pension scheme you set up, providing not only for more expensive future new pensions but also making up the shortfall for all those past years when, with hindsight, you and your employees didn’t put enough in to cover the (now) higher cost. Oh, by the way, no, you can’t go back to the employees for their share of the shortfall, or to the Government for the cost of the retrospective benefit improvements they legislated on to your scheme. Tough on individuals, Much tougher on companies. Give them a break, don’t drive them to the wall or make them uncompetitive compared with their less enlightened competitors (who didn’t bother with a pension scheme) by insisting they make up the full 100% of the lost ground themselves.
2. “EQUALISATION MK I”. Among the legislation not listed by you is pensions “equality” legislation. That has cost this country (i.e. companies) billions. Partly through unanticipated benefit increases but also it is questionable whether the cost (i.e. the value to the recipients) of these benefit improvements comes anywhere near the wasted, unproductive cost of implementing the imposed changes in the face of regular revisions over the past twenty years arising from various courts’ interpretations of what the European Court even meant in the first place.
All of this was imposed on us by Governments who blithely carried on themselves in the meantime providing State Pensions from unequal ages and who are now trying to tell us how, in occupational schemes, we must now set about equalising Guaranteed Minimum Pensions. These are substitutes for unequal State Additional Pensions so are, by definition, incapable of equalisation. And all this is twenty years after the event . . . and the additional hiatus and unproductive costs so created are coming along hard on the heels of the abolition of Protected Rights, the alternative means by which people could Contract Out of exactly the same State Additional Pensions. Forget one, increase the burden of the other? Come on, please. Just convert GMP to ordinary scheme benefits in the same way as you have removed the Protected Rights shackles from money purchase schemes. Save huge amounts of unproductive cost.
3. “EQUALISATION MK II”. This and other equalisation costs are driven by European insistence that the facts of life are wrong and various normal manifestation of inequality between men and women must be legislated away. They are in the process of insisting that this be applied directly to the buying of a pension at retirement where the propensity of women to live longer than their male counterparts is to become no more than a figment of our imagination and must not be taken into account in any way in deciding how much pension you can afford to pay each year to a 65 year old woman compared to what you would pay each year to a 65 year old man with the same amount of money in his hand.
The original Barber requirements got completely out of hand and we’re still suffering the consequences today. PLEASE DON’T LET IT HAPPEN AGAIN WITH “GENDER NEUTRAL” ANNUITY RATES.
Thank you.Comment Tags: Annuity Rates, cost, Equalisation
Basic State Pension should return to the subsistence level safety net it was originally designed to be, with a sea change of public attitude away from the ‘I deserve to be given…’ and towards personal responsibility for saving and providing for one’s self.
The FCA and PRA (due to replace the FSA shortly) should be fully accountable to Parliament and the Money Advice Service should be publicly funded with its remit clarified (i.e. it is currently deeply misleading to hold itself out as providing regulated ‘advice’). The FSA during Hector Sants’ tenure mocked the TSC with arrogance.
Despite the FSA’s and HM Treasury’s distaste for the profession, highly qualified financial planners should play a much larger part in the savings culture of the UK. High Street bank salespeople should be made to stick to cash ISA savings unless they are properly qualified.Comment Tags: Pension
Abatement of peoples pensions when they go back into work in their old age is wrong and should be made illegal. Clearly people only work in old age if they need extra money and to have the pension reduced means they have no incentive to give the new employer full effort and are unresponsive to short term requests to do more for more money to meet a business need.Comment Tags: Abatement of pensions should be made illegal
My GAD review at 71 almost halved my private pension income limit, which is very painful, and wrongly completely outside my control. Being five years older than my first review, this is bizarre. I also object to the high tax on my SIPP pension pot if there is any left when providing for my children. It is my money carefully saved over many years and I do not see why the government should have any control over what I do with it. I regret having put anything in to a pension scheme, since it has enabled the government to manipulate it to their own advantage. All such controls should be scrapped, and pensions should be migrated to funded schemes as soom as possible.Comment Tags: GAD review, legacies., money purchase
I respond to the comment of Tim Craig as I agree with his perspective.
I did not save much in pensions because the government regards pension savings as ‘their money’ to regulate and manipulate as they please.Comment Tags: GAD, money purchase, pension fund ownership
From a working mothers percpective, and nhs nurse; I feel that when anyone joins NHS, nurses elsewhere, then rejoins NHS their Pension should automatically be continued and carried on not start yet another scheme!
The Railway Pensions (P&DoS) Order 1994 is NOT a piece of ‘red tape’. It protects employee rights existing at railway privatisation – replealing this will potentially result in a significant reduction in pensions for railway workers. Those of us who have saved for our retirement do not want to see our private employers boost their profits at the expense of their employees’ pensions.Comment Tags: Railway Pension, Railway Pensions
I agree with many of the comments listed on these pages. I have paid into a final salary scheme for the last 28years. I currently pay pension contributions of 11% of my wage which will now rise to 15% over the next couple of years. Why has public sector workers had their pensions scrapped or altered? We are told it is because they are unsustainable but this is nonsense; consider the money ‘OUR’ government gives to overseas education, bailouts, common market contributions, benefits and free medical care to foreign nationals etc THAT is unsustainable. This country is being dragged into bankruptcy what we needed is a government who puts its citizens first before it considers if it can help the rest of the world.Comment Tags: Pension
Replying to Kevin Futers.
I also saved money over many years into a fund for my retirement but was never a member of a civil service final salary scheme.
As the civil service schemes are not backed by a fund I am now forced to subsidise the retirement of civil service pensioners with my taxes. That is what ‘unsustainable’ means to me.Comment Tags: funded pension, subsidy
Take care when chaning pensions – too many people I know are not bothering with any pension provision because of Government changes – it will put massive burden on the state in future years with means tested benefits soaring.
Protect pensionsComment Tags: Pensions, private, state
The discrimination in SIPP’s against any residential property potentially prevents residential use of space above commercial property such as shops. We have a shortage of homes and, as Mary Portas has pointed out, we need to bring a full mix of uses, including residential, back into our high streets. There should be some way to make this legislation free up that housing potential.Comment Tags: living over the shop., residential property, SIPP