2019: A year of frustration for pensions

If you were to ask me how I will remember 2019 for pensions, I think the overriding word would be “frustration”.

Frustration with Parliament, primarily because trying to deliver ‘Brexit’ consumed so much parliamentary time this year – and we’re still in Europe!

The plethora of twists, turns and manoeuvrings that dominated the political headlines during 2019 masked the real issue for those of us who argue for reform to pensions tax legislation, in response to the ‘tax traps’ and ‘unintended consequences’ of the current system.  Namely, there was precious little parliamentary time left to “get reform done”.

The year began with the introduction of the “pensions cold-calling ban” after two years of consultations and delay, during which time thousands more people were scammed out of their life savings.  Although The Pensions Regulator and the Financial Conduct Authority (FCA) have joined forces to promote their ‘Scam Smart’ campaign this year, the lack of any significant marketing campaign surrounding the cold-calling ban sadly implies that most consumers will still be unaware of it.

Making headlines for all the wrong reasons this year, was the increasing impact of the tapered Annual Allowance (AA) on NHS Pension Scheme members.  The threat of punitive tax bills for those staff undertaking additional shifts led to many refusing to do so, whilst NHS waiting lists increased to unprecedented levels.

As the busier winter period beckoned, a ‘knee-jerk’ reaction by the Government saw them offering to annul any excess tax bills incurred by NHS Clinicians during this tax year, in order to get them working overtime again.  Surely, the ‘proper’ answer to unintended consequences like these is to scrap the tapered AA altogether – and yet this can’t be achieved whilst Parliament is either prorogued or dissolved!

The FCA kept pension providers busy in 2019, with numerous consultation papers and policy statements for us to wade through.  Highlights included changes to ‘wake-up’ packs, in the hope they will actually now be read, and the introduction next August of default ‘investment pathways’ for those consumers going into drawdown without seeking advice.

Implementing this latter requirement, mandated upon providers regardless of what pension ‘wrappers’ they offer, will certainly dominate the first half of 2020.  It will be some years after, however, before their effectiveness will be able to be determined.

From my perspective, I want 2020 to be less frustrating and more productive, with a new Parliament in place, and a return to a ‘normal’ parliamentary timetable.  The first Budget of the new Government will potentially reveal their approach to pensions in general, and appetite for pension tax reform in particular.  If the Conservative Party secure a Commons majority, they have already promised in their manifesto that they will ‘fix’ the tapered AA issue, amongst other things.  Time will tell if they do.

Looking ahead, if I am writing a similar article to this one in a year’s time, I sincerely hope that the word “frustration” does not appear!

Some comments first appeared on FT Adviser.