The Dust of Rumours
In the week of A-Day itís worth just saying in plain terms whatís going on around us.††About half†the people in the UK workforce have no private pension provision whatever, whereas the other half (including all those who work in the public sector) have either state-funded or voluntarily self-funded pensions to look forward to in the future 1.
The self-funded pensions for the private sector employees in the UK have something like £1,300 Billion put aside for the future.† Thatís a small fortune and is about as much as†the total funded pension provision for all other Europeans 2.† Some of the people in the UK workforce (basically those in the private sector) have stacked away more in pension funding than almost all the other European Union countries added together.† This has been mainly achieved because so many of our larger employers in this country have embraced the previous voluntary pension system that was put in place in 1956 and came to an end yesterday on A-Day.
From the Governmentís perspective, at a kind of macro level, the pension conundrum in the UK is that half of us will be OK pension-wise and the other half are pretty much snookered and likely to be heading for means-tested handouts in their old age from an ever limited source of future tax take.† The priority, in my opinion, is that the Government should have tackled the fact that half of the workforce isnít saving, but as you know they kind of put that on the back burner while they dealt instead with Ďreformingí the tax system that supported our private sector pension savings.
Thatís always seemed a bit strange to me, but I donít really find anything surprising any more if Iím being honest with you.† Sooner or later, of course, the Government guys will have to turn to deal with the really important pension issues like how can they get the people who arenít saving to save for a pension when qualifying for the means-test effectively taxes those savings if they do so.† Thatís a hard one and an issue that has apparently caused some kind of rift in Government circles.† There have been plenty of rumours flying around in the press for the last week or so concerning the affordability of real pension reform (rather than the kind of cheaper tweaking that A-Day involved) and who might support which camp and who may not and all that kind of pointless stuff.† There have been statements too about the future of means-testing and for all I know we may be about to see a complete about turn on Government thinking on that.† Equally, for all I know we may not.† But at this stage the rumours donít matter.† Itís what people do that counts, not what they say they are going to do.
In the meantime, A-Day has happened.† Our pension tax laws that supported the part of our pension system that has been working spectacularly well for exactly half a century, and have put us in such a strong funded position when compared to all other European countries, have been binned in favour of new and retrospective tax laws.† Some of those laws themselves are far from clear even today and many have been rushed out so recently that the ink is still barely dry in the statute books.† Itís that hurriedness that I want to ask you about if you donít mind.
You may have seen some of the press comment that was generated by our last BeeHive poll on the suitability of pensions and the National Pension Saving Scheme proposals.† The open letter we sent to Government as a result was a valuable addition to the public debate on that particular aspect of reform I think.† Today, weíve put a new poll onto the Home Page of the BeeHive to see what those of you advising companies are finding in your day to day dealings with employers who are good enough to run pension schemes for their employees in our voluntary system.† The Question we have set is a simple one:
In your experience to what extent†are the employers you meet aware of the nature and effect of the A-Day changes?:
a) Fully conversant†
b) Slightly knowledgeable†
c) Completely clueless†
As usual the BeeHive poll allows you to qualify your answers with written comments and, quite frankly, it is those comments as much as anything that seem to hit home with commentators and (hopefully) Government officials.† So if you have the time to take part please add your comments too.† Again, as usual, we will make use of the poll to ensure that BeeHive users can make their views known on these tax reforms to the Government people steering it all so that they can get some insight into what happens in real life with all this stuff.
You can get to add your vote and comments easily by clicking the following link to the BeeHive Home Page:
Thanks for your help and have a good weekend!
7 April 2006
1. The Pensions Commission, Key Facts from the First Report of the Pensions Commission, October 2004.
2. European Federation for Retirement Provision - Total 2nd pillar pension fund assets (1995-2002), excluding book provisions within sponsoring companies, figures for 2002 used.
Any research and analysis has been provided by us for our own purposes and the results of it are being made available only incidentally.