Those who can’t remember the past are condemned to repeat it


For too many people, pension planning has been an incomprehensible maze. So the Government has published proposals for a radical simplification of the tax rules for pensions to help people make clear and confident decisions about their pension savings. These proposals will be designed to mean increased flexibility about when and how people can draw benefits from their pension. The new rules will be simple, durable and readily understood.

The sentiments above come from the Government's consultation document on changes to the pensions tax regime… but not the 2014 documents on flexibility on taking defined contribution (DC) funds at retirement. These comments were made in the Forward to the original green paper on the A Day changes in December 2002 which you can find here.

Eight years on from 6 April 2006 (A Day) and many people would still see pension planning as an incomprehensible maze. What started as simple principles became burdened with more complicated rules as they were turned into actual legislation, including a number of anti-avoidance rules to prevent more generous tax treatment than had been originally intended.

The pensions industry will be concerned that, just like the A Day changes, the proposed simplification and flexibility on taking DC benefits at retirement could become subject to increasingly complicated rules as the idea is implemented into law. Without this complexity HM Treasury might be concerned that tax planning might occur, or that people may not be protected adequately. But this complexity would increase the cost and difficulty of providing the impartial face-to-face guidance the Government considers essential to be offered to scheme members. And whether some guidance provided at the point of retirement will be enough to support decisions that individuals might need to make several times during a long retirement is a moot point. 

But, keeping the complexity at bay will be essential if members are to feel confident navigating the pensions maze. That’s what everybody said last time round and it remains true this time round too.

Tim Sexton is a director in our Pensions team. You can contact him on +44 (0) 20 721 23943 or by email at[email protected].