Better regulation. Our own government has adopted this grand European idea to regulate smarter rather than harder.
The bottom line is supposed to be this: less new regulation, removal of superfluous legislation from the statute book, and simplification of the stuff that we really need to keep. And who are the winners? Supposedly business and the government themselves.
Now, I can’t speak for government in considering whether this better regulation agenda has saved them a few quid, but I can see what has happened in business, particularly those involved in pensions.
This week, two major U-turns have taken place -, one to remove tax relief from pension term assurance and the other to add extra tax charges to the death benefit under alternatively secured pensions.
That these opportunities were going to be heavily marketed after A-Day was no secret. The trade newspapers and weekend money supplements were filled with comment about these issues and the benefits that they offered. Unless politicians don’t read newspapers then one must assume that they could see what was about to happen too.
I’m disappointed that we have lost ASP death benefit and life assurance with tax relief. There are genuinely good reasons why we should not insist that people buy annuities and that they have sufficient life cover, particularly those with young families.
But what really gets me in all of this is the flagrant disregard for the businesses that have geared themselves up to serve these markets. It costs money, and lots of it to develop systems and processes for new streams of business. These policy changes on the hoof, hidden in the detail of budget papers cause a lot of financial damage.
And it’s not just providers. Advisers have built business plans around this and recruited people to do the work.
These changes also destroy consumer trust and confidence in the pension system. People find it difficult to understand pensions as it is. What chance have they got when the rules change every nine months?
Almost exactly a year ago we had the late withdrawal of the residential property carrot that had been tantalisingly dangled in front of our noses. That was just about liveable with. After all, it was all of four months before the new rules were due to start. Had it been four months after, we might all have spent a lot more money than we actually did.
Going back to 2001, we had stakeholder pensions that cost the insurance industry and advisers a small fortune but delivered little benefit. Thankfully, the expensive stakeholder lesson was learned when the lame-duck Sandler products were shunned by providers and advisers alike.
This constant tinkering is not better regulation. It is ill-thought through regulation. And far from removing regulation from the statute book, it is adding to the paper mountain. In pensions we had 350 pages before April this year. Now we have over 600. Is that legislation simple? No, it is a lot more complicated that what was there before.
Is it saving business money? I’ll leave you answer that question, but here’s a clue - you won’t need a regulatory impact assessment to find the answer.
Have Your Say: Phil Castle in Kent says:
There are only two different conclusions which can be reached:
- Either Gordon Brown and the Treasury are totally incompetent, or
- This was their aim all along and the disruption and disencentive to save was the true aim.
Can any New Labourite suggest any other alternative as I am still waiting to hear ANYONE willing to express one!
John Lawson is head of pensions policy at Standard Life.
The views expressed are those of the author and not those of the company he represents.IFAonline
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
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