UK government admits pensions are over-regulated
UK– Secretary of state for work and pensions Alistair Darling today promised to make pensions “genuinely popular” by making them more accessible and simpler.
Speaking at the NAPF conference in Brighton, Darling acknowledged that “the pendulum has swung too far in favour of regulation and complexity” and that the majority of people found pensions and the products on offer too confusing which was a main disincentive when it came to saving.
He compared this to the fact that more than 12 million people have saved over £78 billion in ISAs since their launch in April 1999. He said the government needs to look at whether the incentives to save are effective not only to encourage savers, but also to induce employers to provide or maintain pension schemes.
He added, “we are looking at whether we’ve got the level of regulation right and whether we’ve got the right drivers within the market place to encourage choice and competition.”
The government is waiting to receive this summer the results of three separate reports it commissioned last year. EFRP chairman Alan Pickering is reviewing ways of simplifying pensions regulation while former COO of Natwest Bank Ron Sandler is looking at competition across the retail investment industry and the Inland Revenue is considering whether it is possible to simplify the taxation of occupational pensions.
The government intends to publish its proposals this autumn.
Other factors, notably FRS17, must also be taken into consideration, said Darling. Whilst no-one can argue against transparency, a new accounting standard “isn’t the root cause of the difficulties we face”.
He did acknowledge however that “there is criticism that accounting for pension assets and liabilities on the balance sheet only provides a snapshot at one point in time”. As such, investment decisions should not be based on what could be “ a mere snapshot”.
Increasing life expectancy also demanded that the over 50’s should be encouraged to stay in work. A tendency to leave the labour force before retirement age had compounded the current problems that were being faced.