21st Century Pensions – how it all began

In my beginning is my end

I happened, purely be the  serendipity of social media to come across this post remind me of the genesis of 21st century pension policy in  a White Paper called “simplicity, security and choice“. This was the basis of the Pensions Act 2004. The Pensions Act 2004  provided the platform for pensions to make progress in the 21st century.

Simplicity – Security and Choice

This White Paper introduced us to the concept of the Pension Regulator (tPR) and The Pension Protection Fund (PPF)

Before the establishment of the PPF and the Pensions Regulator, occupational schemes were regulated by the Occupational Pensions Regulatory Authority which ruled the roost between 1995 and 2005 when tPR succeeded it. OPRA had wide ranging powers but was insufficiently resourced, some would say that tPR is over-resourced and under-powered. Regulators have an infinite capacity to expand!

While TPR’s development since 2005 has been controversial, the Pension Protection Fund, has been a model of a state pension scheme that has worked with the private sector to restore consumer confidence. It’s architects should be very proud of what it has become.

Alongside the PPF, the 2004 act , which grew out of this paper, scrapped the one size fits all Minimum Funding Requirement with Scheme Specific Funding which still survives and looks like it will survive the DB funding code which now looks to become so diluted as to be but a ripple in the stream.

Consumer Protections

The paper also led to important consumer protections in act, meaning that people who left occupational schemes within the first two years, vested a pension rather than a cash refund of contributions. Members were given consultation rights on changes to their pensions and most importantly priority orders were established to ensure that pensioners were put first when a scheme got into trouble. Employers were required to meet their pension obligations and could no longer wind-up a scheme without full funding.

But less good news for consumers was the allowance for schemes to further limit increases in payments of pensions, which has eased employer liabilities but means that at times like now – members are less protected against high inflation than previously.

Pension freedoms

The paper even pointed towards developments in pension communication which are arriving today. It called for Combined Pension Forecasts – the precursor of the dashboard which would have allowed us to see our prospective state pension and our occupational pension on one statement. Nearly 20 years will pass before this becomes a reality!

And the paper calls for more flexibility in the way we can draw our retirement benefits. While I’m sure that the authors of “Simplicity, security and choice”, hadn’t the pension freedoms in mind, they did recognise that new structures for the way we were paid our pensions would emerge.

Hot on the heels of this paper we had the Turner Commission which looked at adequacy and  came up with radical solutions to get everyone saving for their retirement. That was glamorous, this White Paper isn’t. But my thinking is that we would not have had the confidence to stage auto-enrolment had it not been for the measures contained in “Simplicity, security and choice

The history of pensions

I’m very grateful to the Pensions Archive Trust, whose Chair is Alan Herbert and CEO Grant Lore – two good people. They have brought me back to the beginning of my interest in pension policy. But of course the history of pensions is a lot longer than the scope of time since this White Paper and I look forward to delving into the history of this subject in weeks and months to come.

Thanks too to the National Archives, for making this fascinating White Paper available again.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to 21st Century Pensions – how it all began

  1. Ros Altmann says:

    Hi henry
    I have all this and so much more in my files at home. Was working on these policies from 1999 when I worked at the Treasury on the Miners review and then moved to Number 10 to work on pensions and savings policies, started working on the lack of DB member protection for pre-pensioners and then we got the Pensions Commission to look into things too. My first paper on the problems of consumer detriment in annuity selling was in 2000 and need for simplification and member protections, lifetime Savings Accounts seeded by Child Trust Funds and so much more. If only things didn’t take so long. And I have to add that, thanks to Andy Young, we did finally get a better outcome for FAS whose members were initially left high and dry in most cases while those in PPF, who benefitted from lessons learned after FAS scheme failures stripped members of their entire pension, were treated so much better and had at least some warning of not getting their full pension.

  2. henry tapper says:

    I had you and Andy in mind when reading and writing Ros. The intricacies of the FAS/PPF situation are lost to me but the problems with mis-selling and mis-buying of retirement products persists. Let’s hope we can find better ways to help ordinary people take decisions on how they turn their pots to pensions!

  3. con keating says:

    It is worth noting what the Green Paper said about the Pensions Regulator:
    “The new Pensions Regulator will concentrate on rooting out fraud and bad practice so that everyone has confidence in the system.” This is not objectionable but bears little relation to the activities (and resource allocation) of the Pensions Regulator today.

    It continues with: “It will do so in a way that supports our objectives of simplicity and reduced burdens on business.” And in these terms, it can only be described as an abject failure!

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