A-day has been part of my life for the last five years. I have been involved with its development, from its original launch in the Green Paper in December 2002 (Simplifying the taxation of pensions: increasing of choice and flexibility for all).
At that time, Gordon Brown and Ruth Kelly spoke of “sweeping away the existing pension tax regimes, and replacing them with a single lifetime limit on the amount of pension saving that can benefit from tax relief”.
This was the first of three consultations on pensions tax simplification. And throughout all I was an optimistic fan of pensions simplification. I really believed in it. And I think I was right to.
The Revenue certainly started on this road in the same mindset. Pensions tax simplification was going to be based on “simple, durable, and easily understood rules”. If pensions fitted into these simple rules then it would be allowed.
We were going to get rid of all the differences between occupational schemes and personal schemes. We were all going to adhere to two simple limits – the lifetime allowance and the annual allowance. The same rules would apply to everyone.
Somewhere it all went wrong; possibly when the principles of pensions tax legislation passed from the policy makers in government, to the legislation writers. Slowly, we started to get complex rules and definitions. And the Registered Pensions Scheme Manual was born, and with it almost 1,000 pages of technical information (and that’s not counting the member or employer pages).
And, of course, there were some significant changes to policy. The first u-turn was a decision not to let people invest in residential property, and this was followed a year later with the punitive tax charges for ASP and the killing-off of pensions term assurance
It was the final details of these in the Budget papers last month that left me worrying about the health of pensions simplification. We now have a new set of, some may say, equally complex rules for how much you can pay in and take out of pensions. But any true spirit of adopting principles - instead of prescribed and complicated legislation and allowing things like ASP and pensions term assurance to go ahead - has fallen by the wayside.
A-day has been a fantastic opportunity for the industry, and we have all benefited from consistent rules, a single investment regime, and full concurrency. But the dream of December 2002 of truly simple, durable and easily understandable rules seems to be fading fast.
Rachel Vahey is head of pensions development at Aegon Scottish Equitable.
The views expressed are those of the author and not those of the company she represents.IFAonline
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