Pensions News (PN) has been exercised recently by the debate about the forthcoming referendum on the vexed question of whether this country should remain within or leave the European Union (EU). PN thought he had dealt with the matter, in a sort of a way, a couple of issues ago but evidently not. PN was asked to comment (in writing) on a paper produced by another law firm which went into some detail about the (pensions) consequences of the UK leaving the EU. PN gave some comments, made some general observations about both sides of the argument and strode off masterfully to get himself some coffee.
PN was then disturbed to be asked to take part in a panel seminar which posed similar questions. If you, the reader, have watched or listened to “Question Time” or “Any Questions” on BBC television or radio, you will understand how this works. For the uninitiated, the way it works is that there is a panel of (usually) four persons plus a chairperson. The chairperson takes questions from the “audience” and then invites each of the panel to have a go at answering it. Pension panels are almost entirely unlike the panels organised by the BBC. You, the reader, can probably imagine how.
PN sat in front of the panel audience and feigned unconcern as the questions came in. The first question asked what each panel member would do to make pensions interesting. PN coughed loudly into his handkerchief at this question and then stared at the table in front of him. One of the answers put forward related to a campaign (if it can be called that) by the association of British Insurers (ABI). The campaign has the support of the Government and it includes a plan to publish a new guide “to make pensions language simple, clear and consistent in order to help customers better understand their retirement options”. The ABI’s director of policy is reported to have said that “the industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them”. Readers will readily acknowledge that the adjectives “simple” and “clear” are not usually associated with pensions. They are not normally associated with the law but particularly not pensions law.
PN decided to welcome the ABI’s initiative and said so when it came to his turn to answer. In giving his answer, PN suggested that part of the ABI’s initiative could include a campaign to reopen Botany Bay for anyone who continued to use the term “pension pot”. PN has been irritated for a long time by the term “pension pot”. “Pension pot” contains or seems to contain an assumption that there is a physical pot or series of pots somewhere and that people, lots of people, throw their loose change into them. “Pension pot” also (in PN’s head anyway) conjures up highly misleading images of factories in Stoke on Trent working overtime to send porcelain receptacles to every household should have one; sold with the maxim “now “auto-enrolment” is in, every home should have a pension pot”.
PN knows persons from Stoke on Trent and is reliably informed that an industry to produce pots for pensions does not exist in the Potteries. To PN’s surprise, his suggestion that the term “pension pots” be abolished was met with nods of approval by many in the audience. This, of course, may have been because it was the first thing said by a pensions person which the audience actually understood although PN does not believe this. The chairperson asked PN what term he would use and, after only a slight hesitation, PN suggested a “fund” or “pension account”. Duly emboldened by his minor success, PN went on to say that there were several principles in pensions which made the subject naturally complicated and almost entirely uninteresting to most members of the public (including every single member of PN’s family and his friends – most of whom he would like to keep). In other words, any sector which had “anti-franking” legislation (which defies most analysis) and something equally nasty called a “guaranteed minimum pension” (GMP) would shake off its reputation for complexity only with difficulty.
Readers may wonder why PN goes pale at the mention of a GMP because a guaranteed minimum pension, like a sense of entitlement, sounds like a good thing to have. The term conveys security; an assurance that the recipient will get no less than a certain amount of money in retirement. PN has no wish to tangle himself up in trying to explain GMPs in today’s article; better lawyers than PN have tried to do this and failed. Suffice it to state that a GMP is designed to replicate part of the state pension (formerly the state earnings related pension or SERPS) which certain members’ pension schemes contracted out of for scheme membership between April 1988 and April 1997. Right there, in a single sentence, the reader is able to see what it is that makes most people despair of pensions being anything other than impossibly complex. In fact, PN can actually hear the sound of brains turning off; this is part of the reason PN feels the ABI has its work cut out.
GMPs have been made even more upsetting (to those involved in administering them) by a Government requirement to “equalise” them (i.e. ensure that no recipient’s GMP is of a lesser value by virtue of that person being male or female). Having told the industry to equalise GMPs, the Government infamously followed this order up with a statement that it, the Government, would prescribe its own method of equalisation. The Government duly did so to no acclaim whatsoever. Subsequently, the Government told the “industry” that its own method of equalisation was one of several possible methods and it stated that it would endorse none of them (including - in fact especially - its own). The Government then went home for a cup of hot sweet tea to get over the shock and prepared what are now called the “new flexibilities”.
Back to the panel seminar: the panel was asked whether it thought that the forthcoming referendum on UK membership of the EU would affect pension schemes. In particular, would a UK exit from the EU affect the sector? PN got in first on this by saying that, if the UK did leave the EU, it was quite possible that the requirement to equalise GMPs (the requirement has its roots in EU legislation) would be shelved. PN added that this should form a central part of any campaign to leave the union – not least because that campaign appears to have little in the way of actual evidence and information to reinforce its arguments. In making this comment, PN successfully (and deliberately) demonstrated precisely why it is that he, PN, is not involved and will remain uninvolved in the referendum (PN will vote however). Not wishing to be known as the man who likes to talk about GMPs, PN did go on to suggest that many pieces of English and Welsh law (PN leaves it to his colleagues in Edinburgh to comment on Scots Law) which have their foundation in EU directives are unlikely to be repealed if this country were to leave the union. Such pieces of legislation tend to be based on principles of non-discrimination (such as “equalisation”) and it is hard (for PN anyway) to see these principles being unwound if the UK were to leave the EU. Perhaps, PN nearly added, Mr Michael Gove would not agree.
PN rarely (if ever) talks about football as that sport generally yields no news at all about pensions. Today is different as PN waves you into your weekends by telling you about a press release issued by the Pensions Regulator (TPR). TPR has fined Swindon Town Football Company Limited for failing automatically to enrol its eligible jobholders in to a qualifying pension scheme. It has failed (repeatedly according to TPR) to comply with its auto-enrolment duties and has, as a result, been fined £22,900. Oh dear. Sports clubs everywhere, take note.
Until next time…..