What such fundamental change will mean in practice is that every company pension scheme and every individual pension arrangement will be affected by structural change both prospectively and retrospectively. Obviously that will entail a lot of work for pension providers and employers who run pension schemes and it will also mean many people will need financial advice about their own pensions as things change. (I’ve written a number of other BeeLines about the detail of all this which you can download from the BeeHive for free if you want to. No pressure.). As part of the consultation process, the Inland Revenue have asked when people think ‘A-Day’ should be, and that’s what I was talking about that day at the Revenue’s seminar.
The Inland Revenue consultation paper suggests that ‘A-Day’ should be 6 April 2004, which I think is too soon. In fact, the more we’ve looked at it the more concerned we’ve become about these fundamental and far-reaching changes being hurried through too hastily. Our view at Scottish Life is that we think we’ll need two years to implement the changes and that’s pretty consistent with our past experience of putting in place wide ranging changes in legislation. The Pensions Act 1995, for instance, which had to be implemented in 1997. Or, indeed, the 1986 Act which introduced Personal Pensions and came into force in 1988. So two years is what we’ve been saying, and is what I was saying that day at the seminar when I was asked “Two years from when then?” or something similar, and that’s when this new phrase kind of came into being.
The thing is, I hadn’t really thought about it that much and when I did it seemed to me that it’s pretty crucial we know exactly what ‘it’ is before we can say when we can implement ‘it’. At the moment we don’t have any real details of what exactly the new rules and regulations will be. We won’t know, in fact, until the consultation period is over and the Inland Revenue publishes them in intricate detail - all ‘i’s dotted and ‘t’s crossed, sort of thing. And I coined the phrase “Penny-Dropping Day” to describe that and said that I thought ‘A-Day’ should be two years on from ‘Penny-Dropping Day’. So, in plain English, if we know all the details of the changes by April 2004, then ‘A-Day’ should be in April 2006.
It’s not just as simple as waiting until we know the rules and regulations from the Inland Revenue, though. The Green Paper from the DWP is also going through its consultation at the same time and some of its legislative changes will interact with some of the Revenue stuff, so they’ve got to be pretty well joined-up and we’ll have to know exact details of those changes too before we can get started on the implementation of all this and the giving of specific advice to individuals. So, if anyone ever asks you when you think ‘A-Day’ should be, tell them you’ll let them know when you know when ‘Penny-Dropping Day’ will be. That’ll give them something to think about.
11 March 2003
This document is based on Scottish Life’s understanding of current tax law and 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.