The pre Budget report
Weíve also had the Chancellor's pre-budget statement this week. A good opportunity for the government to tell us what the result of their year-long deliberations on pensions are likely to bring us. I wouldnít have expected the detail in the pre-budget statement, but I did expect we would hear some reassuring words about the direction the pension reforms will be taking.
In the end we didn't get told what would be in the green paper. Instead we were told what would not be in it. Strange. Evidently the green paper will not be removing our right to tax-free cash sums when we reach retirement and, lucky us, we will still only be taxed once on the savings we make for our pensions, or in other words we will still get tax relief on our pension contributions. It's not much, but it's better than being told weíre going to be taxed twice I suppose.
Itís odd though, isnít it, that in a year when an unprecedented number of occupational defined benefit schemes have closed to new entrants; when a third of a million stakeholder shell schemes have been established by employers and hardly anyone has joined them; and the 1% cap on individually -distributed pensions looks to have finally killed off the personal pensions markets, no solutions to the pensions distribution crisis were even hinted at.
Far from it, in fact. The Pensions Credit, the new name for the re-emergence of means-testing and itself the most serious obstacle facing those trying to distribute pensions, has been reaffirmed as a cornerstone of government pensions policy. Oh dear. This isnít what we need. And what does it mean we can expect when we finally get to read the green paper and Inland Revenue consultation paper while weíre eating our turkey dinners with our paper hats on?
Well, I think what was not said about pensions is probably more significant than what was. The Chancellor did not announce that a way had been found to get millions more people saving in pension schemes. The kind of thing he would most certainly have said if we were about to find out that people are going to be compelled to join the empty shell schemes. So it seems weĻve been told that compulsion isnít on the cards for now. Equally there was no statement to the effect that steps are about to be taken to help employers keep good occupational pension schemes from closing if they possibly can.
We were also not told that the catastrophic demise of the individual pensions markets is about to be halted before our industry loses the capability for individual distribution completely. These are taps that will be hard to turn on again once they are eventually turned off. I had really hoped we would be given some encouraging words to indicate that government understands this fact and has decided to stop the seemingly inevitable decline in pensions from happening. But no.
In short, and in my opinion at least, there is still no indication that the pensions distribution crisis in the UK is being taken seriously. And it is a distribution crisis. Itís no good our constantly talking about some kind of nebulous ĎPensions Crisisí. Most people donít know what we mean by that. How can there be a crisis when Minimum Income Guarantee has just been racked up and the Pensions Credit is just about to come to our rescue next year? Thatís what the commentators were saying on the TV after the pre-budget statement. Itís a compelling argument, but it completely misses the point. And thatís our fault for not being more precise when we talk about the damaging changes to pensions we are witnessing at first hand. We should be careful to say precisely what we mean. It is a pensions distribution crisis we are caught in. And itís a pensions distribution crisis we want our government to urgently address.
Sadly, the things we didnít hear this week lead me to believe we have little to expect from the green paper and that further pensions reviews will be inflicted on us while we get even deeper into the distribution crisis.
After that? Another green paper perhaps, published on the seventeenth of December next year if Iím any judge. Never mind. Itíll all be over by Christmas.