PENSIONS: Comic relief
It was just three short years ago that the A-Day reforms were introduced. That they were introduced amid the confusion of U-turns and even U-turns on U-turns was unfortunate and highly confusing but the end result was probably worthwhile.
The concept behind the A-Day reforms was a good one. Basically, the Government gave us all a maximum tax-efficient retirement pot that we could put aside. If we wanted to put aside more than that we could do so but we would get taxed more heavily on it.
The pot size was the same for everyone so we would all in future be in the same boat pension-wise and no one would find it difficult to understand what was what.
Furthermore, the A-Day reforms said that, within reasonable limits, the Government did not mind how quickly or how slowly we filled up our pension pots - the way we did it was irrelevant really as, once we had filled our pot, that would be it as far as tax-efficient retirement savings went.
It was a simple concept. We had a maximum lifetime pot and, by and large, no one really cared how we filled it so we could all be left alone to get on with our lives and not have to worry about the intricacies of the tax laws every time we took the socially responsible step of deferring income for later in life. An excellent idea.
Of course, there were complications relating to protecting the past rights of those who already had amassed substantial pension savings under the old regimes but complications of that sort had to be expected. What A-Day promised, though, was that similar anomalies and new complexities would not be generated in the future.
Then we got these changes in the Budget this year. Once again, we find ourselves trying to work out whether people with brown shoes might get more tax relief than people with black shoes if they jump up and down on the spot every full moon for half an hour or so while facing east and chanting some new mantra or other from some obscure tax book.
Or maybe that is what people thought last week and some tiny piece of detail tucked away in the answer to a Parliamentary question from late in the evening during a little known debate on some entirely different topic meant that this would only work if people had the foresight to wear blue socks at the same time as fulfilling all the other pointless tasks? Or maybe that in itself is a mis-interpretation of the runes?
Whatever, it just seems so crazy to me.
First published in Money Marketing, 16 July 2009
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