Is increasing complexity making pension saving harder ? – guest blog by Ralph Frank.


The most conclusive finding of a recent survey by PwC into pensions taxation was not even related to the respondents’ views on the central question of the survey (namely, the most appealing tax scenario for their pension)! Sixty percent of respondents said that the biggest barrier putting them off saving more into their pension is the constant changes by the Government as to how pensions are taxed (the next strongest opinion, which was actually related to the core issue being surveyed, had a 40% support rate). Change has been a constant for some time in UK pensions. The wider system, let alone its clients, appears to be struggling to keep up. A consequence of this struggle is that an already complex system is becoming increasingly convoluted, further scaring off clients (and possibly providers too!).

I was struck by some of Government’s self-inflicted legislative challenges when working on a response to the consultation into the early exit charges levied on (some) pension products. For example, the consultation (Box 2.A, p8) highlights the seemingly conflicting classifications in law of ‘cash balance benefits’ and ‘money purchase benefits’ between section 181 of the Pension Schemes Act 1993 and section 152 of the Finance Act 2004.

Such has been the pace of legislative change that the team behind the website, where UK legislation is posted on-line, has struggled to keep up with these changes. The early exit charges consultation threw up an example, with a change outstanding related to section 152 of the Finance Act 2004. Annuities have been the subject of even greater activity, particularly since the 2014 Budget. There are ten changes outstanding in respect of the legislation that deals with lifetime annuities related to money purchase arrangements, paragraph 3 of Schedule 28 to the Finance Act 2004. The team’s remit stretches well beyond pensions but pensions is no doubt a contributor to the backlog. If this team can’t keep up, what hope is there for the lay saver?

The Government is currently consulting on “strengthening the incentive to save”. Much of the good that might result from this consultation (and/or the multitude of others recently past and present) is being undone by the uncertainty created by the constant change that seems to hang over UK pensions. I mistakenly, in hindsight, thought that the changes might come to an end after the May election but, if anything, the potential changes appear to be mounting. PwC summed up the situation saying “our research shows that the current system is far too complicated and continuous changes are putting people off saving more towards their retirement”. What will it take to get the Government to take a long-term view of provision for later life, with corresponding incentives as well as legislative/regulatory simplicity, consistency and stability?

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Is increasing complexity making pension saving harder ? – guest blog by Ralph Frank.

  1. says:

    have to agree that the sheer scale and number of changes is leading to uncertainty. A Long-term view is required when considering making pension contributions, and regardless of the merits of the changes, there are simply too many. It is fantastic news for me as an adviser but I do feel sorry for clients who would like me to give them some comfort that things won’t keep changing.

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