A few years ago (Pensions News will refrain from reminding you, the reader, just how many years ago it was because he doesn’t want to spoil your Friday morning by giving you yet another piece of evidence that shows how time really does fly - but for those of you who are really curious about it, it was in April 2008), a Government body called Ofcom decided it was acceptable for mobile telephones to be used on airliners at any height above three thousand metres. Defending the decision which, some said, might affect passengers’ rights to travel in relative peace and quiet, an Ofcom spokesperson indicated that passengers would rely on texts and emails and not make calls. What he said was this; “social norms, as well as background noise, may dissuade most people from making phone calls in crowded planes”.
Earlier this week, PN came face to face with Social Norm. PN was on a train and Social Norm was sitting diagonally opposite. PN can tell you, the reader, that Social Norm was in no way dissuaded by background noise and, to combat said background noise, Social Norm employed the cunning device of holding his mobile telephone very close to his mouth and shouting his conversation into it. At several points during the journey (between Manchester Piccadilly and London Euston if the reader wants to take steps to avoid meeting this particular Social Norm), the reception on Social Norm’s mobile disappeared. This caused Social Norm to yell more loudly “HELLO! …….HELLO! …………I WENT THROUGH A TUNNEL! YES, I ……HELLO! HELLO? YES……..I SAID I WENT THROUGH A ….HELLO? HELLO? HELLO!!”. This also caused the train journey to last for infinity and beyond as PN fretted the time away by thinking of increasingly nasty (and, PN is now ashamed to admit, unlawful) ways of putting an end to Social Norm’s telephone conversation.
How much is enough?
You, the reader, are probably wondering about the tenuous link that PN will rely on to bring social norms back on to the subject of pensions. Social norms were mentioned in an article PN was reading (in one of the less un-put-down-able pension journals) this week in the context of how much was “enough” in the context of a “decent pension”. The vexed question of “how much is enough?” had vexed minds finer than that of PN and it has done most of its vexing outside the murky world of pensions which PN inhabits. To give him some assistance, PN referred to different articles which dealt with the so-called “pensions revolution” (a term used by the usually staid Financial Times to describe the changes which came in in April 2015 to enable persons aged 55 or more to have the entirety of their pension as cash. A further article (from the same staid journal) avoided dealing with the vexed question by turning back on its readers and asking them how much would be “enough” to enjoy a “comfortable retirement”. PN found no answer to his (and the FT’s) vexed question and so turned to HM Revenue & Customs for assistance by asking a (slightly) different question; “how much is too much?”. On a common sense level, it’s too much if one has so much money that one has nothing more useful to do with it except count it. Although this might not be the approach that a self-respecting Russian oligarch would take, it does seem reasonable (to PN anyway). The thing is this; HMRC had a go, in 2006, at telling people, in pensions terms, what it meant by “too much”.
It was too much, HMRC said at the time, if the value of one’s pension was £1 in excess of £1.5m. Put slightly differently, if one had a pension account with more than £1.5m in it, a penalty tax rate (this aggregated out at 55%) was levied on the excess above £1.5m. The meaning of “too much” then increased steadily until it was defined as £1 more than £1.8m in 2010.
At that point, a different class of social norm came in to being as the then coalition Government (that seems to have happened a long time ago doesn’t it?) decided that the previous group of social-norm-definers had got it wrong and they put the whole meaning of “too much” into reverse. Fast forward to today and too much means £1 more than £1.25m. That amount will continue to decrease so that the meaning of too much in pensions terms will be £1 more than £1m in 2016. PN is in no danger, either immediate or long term, of having to pay the financial penalty of having a pension account with too much in it. You, the reader, may be thinking along the same lines but if you have a member of the family in a (relatively generous) pension scheme (e.g. a public service pension scheme), the value of that person’s pension come 2016 (and after) may well be in excess of £1m and a penalty tax of 55% on the excess is unlikely to be a nice surprise.
You, the reader, will remember previous editions of PN in which PN was describing (FT’s) pension revolution (see above) in more detail. PN will not spoil your Fridays all over again by repeating the substance of those issues here. Suffice it to state that members with funds in a money purchase pension scheme or arrangement may, provided they meet certain conditions, take their benefits as cash. Freedom to take the cash has, in many circles, been welcomed as “freedom” in its pure form; a good thing. As we know (particularly if one is as dry and cynical as PN has been described as by one reader), the concept of freedom includes the freedom to mess things up completely and, in the pensions-freedom sense, there are people out there who are ready to help you and me make the mess referred to; lots of people. Whole gangs (literally) of people. The way The Independent put it on Thursday (i.e. 17th September), information extracted during prison interviews has revealed that fraudsters are “literally rubbing their hands” over the prospect of exploiting members of pension schemes who try to access their funds under the new, liberating legislation. The Independent article went on to refer to a National Fraud Intelligence Bureau report which stated that it was continuing “to highlight the techniques used to trick victims into parting with their hard-earned cash…..by liberating their pension contributions”. Let’s hope the NFIB is doing more than drawing a picture of a scorpion on its “pension liberation” literature. Be careful out there but don’t feel you should interrupt Social Norm’s cacophonous telephone conversation to warn him too.