Full concurrency after A-day
For those of you thinking, “full concurrency? What’s he on about? I thought the BeeHive was meant to be a jargon-free site!” Well, it is, but I do need to mention the gobbledegook before I can explain it, and full concurrency is really important to me and it should be to everyone else too.
In the complex pension system we still have this side of A-Day only certain types of pensions can be mixed and matched [A-Day is when the proposed pension reforms come in, by the way, and blow away all the nonsense we’re stuck with at the moment]. Years ago, if you were in a company pension scheme you could only top-up your pension with something called an Additional Voluntary Contribution Scheme (AVCS) or a free-standing version of that called (predictably) a Free-Standing Additional Voluntary Contribution Scheme (FSAVCS). These things looked a hell of a lot like Personal Pension Schemes (PPS), particularly to the uninitiated 99.99% of the population, but they weren’t . This used to catch people out all the time and many found that the Personal Pensions they saved in while they were, at the same time, members of company pension schemes were a complete waste of time. This caused a lot of confusion and was part of something we all came to refer to as ‘the Pension Scandal’. Some of you may recall the speech I gave at PIMS in 1997 about the unfortunate lady I’d met who had to have all her Personal Pension contributions returned to her (less tax-relief, of course) because she’d been silly enough not to have even been aware of AVCs or even FSAVCs. She had started her personal pension when she was eligible to, but had become ineligible without realising it and was uninformed enough to carry on saving for her future in an ‘illegal’ product. Needless to say, once she found out about this years later it not only cost her a fortune, it also blew her mind. At the time I said that people in company pension schemes should be allowed to have personal pensions too, if that’s what they wanted to do. In those days, of course, that amounted to heresy and, while people may have found my suggestion amusing, no-one really thought it would ever happen. Being able to hold different forms of pension, such as Personal Pensions and company pensions, at the same time was referred to by the jargon-makers of that time as ‘concurrency’ and it was the sort of thing serious pension folk sniggered about if it ever came up.
Some of us, however, never gave up on it and did our best to get the Government types to allow for it during the consultation process for the last Green Paper five years ago when Stakeholder Pensions were being introduced. We nearly made it too. But not quite. What we ended up with at that time was the depressingly daft idea of ‘partial concurrency’. What this meant was that some people could have ‘concurrent’ pension holdings at some times, but not at others, and that some couldn’t. It depended on what they were earning from year to year. In my opinion, this gave us the worst of both worlds. Again you would need a degree in gobbledegook and a doctorate in pure nonsense to have any hope of understanding what you could mix and match with what and when under the ‘partial concurrency’ rules. The term ‘full concurrency’ came from this (i.e. ‘full’ as opposed to ‘partial’). The word ‘concurrency’ was no longer enough for the jargon-hungry amongst us. Fortunately this has all turned out in a historical context to be nothing more than a holding position. The good news is that after A-Day people will be able to have as many different types of pensions on the go at once as they like. Well, about time too. Why should it matter one jot whether people have a PPS, an AVC, an FSAVC, an EPP, a SSAS, a SIPP, a COMP, a COMB, a CIMP, a FURB, an UURB, a COSR or an SHP, or any combination of them, or even one of each if that’s what turns them on? The important thing is they are saving for their pension, that always ought to have been enough, and they should have been left alone by pettifogging rules and regulations.
We will come to look on the recent past as the dark-ages of pensions I’m sure. The fact that the pointless minor differences between different forms of pensions, that seemed so important to us that we even took exams to prove we understood the nuances, will be consigned to history’s dustbin is great news. If this means the many different forms of pension eventually become the same after A-Day, then good. So be it. As Alan Pickering so famously said, a pension is a pension is a pension.
15 May 2003
The information provided is based on Scottish Life’s understanding of current legislation and regulations, the Inland Revenue’s proposals and the Pensions Green Paper issued on 17 December 2002. These proposals are subject to consultation and may change in the future.