Pensions Expert 20th Anniversary: We asked five experts to nominate one law or regulation they would scrap, and another they would introduce. This is what they said.
Ian Neale, director at policy specialists Aries Insight
Bin: One thing I would scrap is the recycling legislation in paragraph 3A of Schedule 29 to the Finance Act 2004 (originally inserted by FA 2006). This bans use of a pension commencement lump sum to significantly increase contributions to a registered pension scheme. In practice, HM Revenue & Customs expects that very few lump sum payments will be caught by the recycling rule.
Create a Later Life Policy Commission, to plan ahead beyond short-term politicians’ horizon of the next election
Ian Neale, Aries Insight
The individual must have deliberately intended to recycle a PCLS, and furthermore, the onus is on HMRC to prove this. Individuals will have to report themselves to HMRC before it can apply. This is a bad law because it is unenforceable. Laws should not be made to clutter statute books unless they are a proportionate and enforceable measure to address a real risk.
Bring in: Looking ahead, one policy measure I would introduce – besides demanding evidence that any new law is really needed – is to create a Later Life Policy Commission, to plan ahead beyond short-term politicians’ horizon of the next election, for a long-term strategy for retirement saving and care.
Hugh Nolan, president of the Society of Pension Professionals and director at consultancy Spence & Partners
Bin: It is important to protect members’ benefits, so I wouldn’t scrap it entirely, but the absolute protection of accrued rights under section 67 is a real barrier to the simplification of schemes and massive reductions in wasteful costs.
We can afford to be a little patient with increasing contributions to a genuinely adequate level
Hugh Nolan, Society of Pension Professionals
I would like to see the protection relaxed so the scheme actuary could certify that a change broadly maintained the value of benefits with no member being materially disadvantaged. Schemes could then convert multiple pension tranches with complex variations of revaluation and pension increases to simplify administration, actuarial valuations, investment strategy and even buyout pricing.
Bring in: I would introduce an opt-down facility on auto-enrolment so that hard-pressed workers can temporarily defer the significant forthcoming rises in contributions rather than facing an all-or-nothing choice. Keeping people within the pension scheme is vital, and we can afford to be a little patient with increasing contributions to a genuinely adequate level.
Chantal Thompson, partner at law firm Baker McKenzie
Bin: I would like to have a Court of Appeal decision on the application in amendment powers of the so-called courage restriction on severing the link to final salary, preferably distinguishing the original judgment, but at the very least providing clarity.
I wish there was more clarity around employer duties to provide information to trustees
Chantal Thompson, Baker McKenzie
Bring in: I wish there was more clarity around employer duties to provide information to trustees, both during the valuation process and when it is engaged in activity that is potentially materially detrimental to the employer covenant.
The regulation regarding the provision of information is not really robust and there is also a disconnect between the notifiable events regulations and the range of potential ‘type A’ events. Although the Pensions Regulator is now being more proactive, it can still be hard work for some trustees to get the information they need to carry out their duties.
Steve Delo, managing director of Pan Governance
Bin: It is difficult to identify one law to repeal, because so much of the ‘pensions problem’ is caused by the interaction of different bits of legislation – hence a string of well-meaning legislative moves in isolation can be disastrous applied in combination. Opting out, personal pensions, the salary cap, Gordon Brown’s ACT raid – all have been contributors to the disaster.
There cannot be many scheme managers out there who would not love to wake up and find out that GMPs were just a dream
Steve Delo, Pan Governance
But the real story of the demise of defined benefit has been overcomplexity, and the lynchpin of that was surely contracting-out and guaranteed minimum pensions. There cannot be many scheme managers out there who would not love to wake up and find out that GMPs were just a dream.
Bring in: A new requirement that no pensions minister can ever introduce a policy without spending six months on a pensions administration team learning to administer the thing in practice.
Steve Webb, director of policy and external communications, Royal London
Bin:There are plenty of pension rules that I would like to abolish, but I would identify the complex limits on pension tax relief as prime candidates. Having both a limit on contributions and a limit on outcomes seems wrong, and I would therefore like to be rid of the lifetime allowance. But the tapered annual allowance deserves a special mention for unnecessary complexity. A simple annual limit on tax-privileged contributions would be far better than the present mess.
A simple annual limit on tax-privileged contributions would be far better than the present mess
Steve Webb, Royal London
Bring in: One very welcome new law would be a requirement on pension schemes and providers to supply data to the pensions dashboard. Being able to see all your pensions in one place could be transformative, but without such a legal requirement many schemes may fail to play ball and the dashboard could end up like a jigsaw with missing pieces – a partial picture, but not the full story.
