As the founders of National Pension Tracing Day, a date in the calendar to track down mislaid or forgotten savings, we were heartened to see a further effort made on behalf of those putting something away for retirement.
Good news that the Pensions and Lifetime Savings Association (PLSA) and the Association of British Insurers (ABI)[i] have joined forces to launch a pensions awareness campaign but I remain convinced more must be done to make pensions easier for savers to understand.
Even though I’ve worked in the industry for more years than I care to remember, I know far from everything about pensions and that’s partly due to the fact that our world has been made ridiculously complicated. Pensions are not inherently complicated but successive governments have made them so.
So it’s a bit of an irony that something else I spotted this week in the pension press was a decidedly unscientific straw poll for most influential pension personality. Step forward pensions minister Guy Opperman, closely followed by Rishi Sunak and the coalition government’s Sir Steve Webb.
An irony because while they undoubtedly have – or did have, in Steve’s case – the power to make change, was it always used wisely? While I wouldn’t want to personalise it, politics and pensions are not always a match made in heaven.
Let me give you an example.
In 2006, the great misnomer of what became known as “pension simplification” was introduced. The-then pension rulebook was a mish mash of legislation, built up over many years, and there was a strong industry and government view that this tangle of laws was acting as a barrier to people properly engaging in planning for their retirement.
The Sandler Report from July 2002 stated: ‘Pensions taxation is extremely complex, and this has a number of effects. For instance, there are eight tax regimes for pensions, each of which is complicated, leads to confusion both for the public and professionals; this is a disincentive for saving, especially amongst the more modest income groups. Simplification of the pensions taxation regime is, therefore, a high priority.’
So, the Labour government of the time set about major reform, which occurred in April 2006 to much fanfare (well, in the pensions industry at least).
But the trouble with governments is that they can’t leave well alone, and they keep changing the rules. As a result, we’re now back in a situation where the public don’t understand pensions and when they try to understand them, they find they’re shrouded in jargon, complexity and rules and we wonder why they’re not engaged!
While I absolutely applaud this joint PLSA/ABI initiative and it completely aligns with initiatives like Aspire to Retire and National Pension Tracing Day that we’ve instigated in Punter Southall Aspire, I am concerned that unless some complexity is taken out of the system, we’ll still end up with most people not understanding and become more distant – not closer – to their pensions.
At the risk of contradicting myself vis a vis the politician pension mix, maybe it’s time for a new Pensions Commission with a remit of revisiting simplification?
A commission can bring about change if the right people are involved and if it gets the right level of support - the last one resulted in automatic enrolment with default contributions; the re-linking of the state pension to average earnings; increases in the state pension age designed to keep the proportion of life spent in retirement constant and a reduction in the number of NI qualifying years to get the full state pension. A pretty good outcome, I think you’d agree.
Optimism, then, that, given the right mix of can-do and the must-be-done, such a body could look anew at what most of us, even the experts, know is complicated stuff.
And I know there are committed industry colleagues and enlightened legislators who would willingly share their views on what changes are needed..
Given that we are inching towards pensions dashboards and that, pension freedoms apart, this sector is more about deliberation than dash, maybe now is the time to bring together such a coalition for change?