Pensions System in a Stranglehold; MONDAY VIEW
Ellison, Robin, Daily Mail (London)
Byline: ROBIN ELLISON
Pensions system in a stranglehold
WE have just ended the season of excess and some of us are feeling rather sick after too much food and booze, and too little exercise. It proves that you can have too much of a good thing.
The same applies to the UK pensions system. Pensions have had a bad press in the last year: horribly complicated state pension credits; impossible-tocomplete forms for the minimum income guarantee (a means-tested extra state pension); insurance companies cutting back on expected benefits; occupational schemes closing their doors to new members; and annuity rates declining.
While some of the problem can be put down to cyclical economic issues, much of it is due to the very regulations that were put in place to protect pensions and pensioners.
Pensions have been cursed by regulation in the last 15 years. A great deal of it was enacted after the Maxwell episode a decade ago when a new Pensions Act was introduced.
One of the 'reforms' gave pensioners priority over paying members when a scheme was wound up, which has led to huge injustices when schemes close down.
Another said there has to be a minimum amount of money in the pension scheme - the 'minimum funding requirement'. This looked good, but it led to the wholesale winding-up of final salary pension schemes.
A third reform, which ironically had nothing to do with pension schemes, was a new accounting rule intended to show the true cost of pensions.
This made companies distort their accounts to such an extent that it was sometimes easier to discontinue the scheme than meet the rules.
We are not alone in introducing counterproductive laws. Next month, the EU is due to introduce a Pensions Directive (intended originally to liberalise the pensions system across Europe) so that our European colleagues would be able to enjoy the kind of schemes we are now closing down! …