Bee-Mail - 5 April

Pension Complification

Remember A-Day? A-Day was seven years ago. It was the date when our previously complex pension system was complicated yet more through a process called simplification. The result is that today we have a far more complex pension system than ever. A report out earlier this week found that people are more confused about pensions in the UK today than they were before A-Day ever happened.

That’s amusing in a way I guess and a good story to tell down the pub if that’s the sort of thing you do, but I don’t find it as depressing as I suppose you’re supposed to. I don’t mind complexity as such.

That’s not to say that I think a complex pension system is ideal; I don’t think that. The ideal pension system would be straightforward and simple to understand. But it would also have to be a benign system that worked to the benefit of all pension savers and pensioners whether they understood it or not.

The worst kind of pension system I can imagine is one that is both hopelessly complex and does not work in the best interests of all pension savers and pensioners so people have to understand it to ensure they don’t lose out by making the wrong choices. It is arguable that the system we had before A-Day was like that with the way means-tested handouts to the elderly acted as a strong disincentive to pension savers by potentially devaluing the pension savings of so many people.

The system we have now may well be more complex and hard to understand, but it is a more benign system too that is aimed at giving fairer outcomes to pension savers whether they understand the arcane intricacies of the legislation or not.

It’s just as well that’s the case. We’d have no right auto-enrolling millions more people into pension schemes over the coming years if it weren’t so.