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.