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Inside edge

Simplifying pensions is turning into something of a nightmare I think. I suppose it was bound to really, what with a proliferation of reviews all taking place at the same time and all aimed at “fixing” different bits of the problem; a bit like three or four different people all working on the same Rubik’s cube at the same time. A recipe for disaster unless everyone’s working to the same master plan and everything is very, very joined-up. Let’s hope it is all as well orchestrated as we are told and that it becomes self-evidently so very soon. Or perhaps the master plan that all the reviews are working to could be published first so we can be reassured that it¹s not all being made up by people as they are going along, and then we can all stop worrying about it.

But what if we end up with a pensions system left in even more of a mess than we had before this particular attempt at simplification started?

And that’s the point really. Our pensions system is as complex as it is because it has suffered from numerous attempts by government guys over the years to try and simplify it and, to be honest, they haven’t done a very good job of it. If pensions weren’t such an important issue to all of us in this country with hardly any state basic pension provision to fall back on, it would all be a bit of a laugh. But they are and it isn’t.

The British people have been good enough to amass more voluntary pension savings than the rest of continental Europe put together. They deserve a simple and fair pensions system from their government and, in particular, one that meets the very real needs of today’s and tomorrow’s pensioners and is not based on the prescriptive nanny-state stuff that we’ve all been daft enough to put up with up to now. That’s where I agree with Alan Pickering’s report.

Pensions need to be able to meet the needs of those who save in them. A good example of how this can be done is the pension scheme MPs have constructed for themselves. MPs have the very real problem that their average tenure in the House of Commons has reduced over the years, so it is very difficult for them to build-up sufficient pension entitlements to fairly reward them for all the effort they put in to the jobs they do for us. The scheme they have at present is a fiftieths final salary scheme, much more generous than the sixtieths schemes the lucky minority have in the real world, but it has to be relatively generous because of the nature of their careers. Fiftieths do not quite do the trick, so they’ve improved it so their pensions will now accrue on a fortieths basis; massively generous compared to normal people, but, to be fair, they don’t have the job security the rest of us enjoy and, hey, their employer has got bottomless pockets anyway, so what’s the diff?

Given that it would be very difficult in the circumstances for politicians to argue that they don’t know a good pension scheme when they see one, we should be able to rest assured that they will eventually come up with a corker of a scheme for the rest of us. Or, at the very least, a simple and fair environment that won’t act against us as we attempt to dig ourselves out of the hole they will not find themselves in. Anything else would be a bit off really.

The needs the British people have are as straightforward and easy to understand as the particular needs of MPs are. We need better pensions, not worse ones. We need more chance of our employers providing schemes for us. We need more chance of those schemes being made better and better and we certainly don’t want the schemes that have thrived for over four decades suddenly evaporating just when we really need the, or the benefits they provide being dumbed-down in the name of simplification. And that is where I disagree with Alan Pickering¹s report.

Steve Bee

First published in Money Marketing, 25 July 2002