To coin a phrase
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. As part of the consultation process, the Inland Revenue has asked when people think A-Day should be, and that was the subject of my speech 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. And this new stuff is retrospective too, don’t forget. 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 in our view 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 Department for Work and Pensions is also going through its consultation at the same time and some of its legislative changes will override 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. This is particularly so when considering the way the single tax regime will interface with the state pension system. 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.
First published in Pensions Week, 17 March 2003