UK - Pensions experts Alan Pickering has claimed pension regulation in the UK has become "intrusive and short-lived" because the private sector is being asked to provide against poverty instead of the state, while politicians are constantly trying to find the "silver bullet" to retirement issues.

Pickering, chairman of Best Trustees and a founding director of the new think-tank the Centre for Retirement Reform (CRR), led a review into the simplification of private pension provision in 2001 that paved the way for stakeholder pensions and the pension tax simplification via A-Day in 2006.

But with more pension reforms planned for 2012, including auto-enrolment and the introduction of NEST (National Employment Savings Trust), Pickering and the CRR are among those calling on the government to deal with the longevity challenge, by providing a foundation of a "simple universal taxpayer-funded state pension that provides a guarantee against absolute poverty in old age". This could be set at the same level as current means-tested benefits to be paid for with a higher state pension age, according to the body. (See earlier IPE article: UK roundup: New lobby calls for DC reform, Church of England)

Pickering argues: "One of the reasons we have intrusive regulation at the moment is because the private sector is being asked to do what the state can do best and can do cost effectively. Once the state deals with absolute poverty, the regulation system governing the operation of the private sector is simply there in acknowledgement that there will always be an asymmetry of knowledge."

He said employers and pension providers "will always know more" than customers and employees, so regulations need to reflect that rather than "prescribe in detail what should happen either at the workplace or at the marketplace". Pickering believes that in this kind of environment employers and employees can then devise remuneration and benefits programmes which meet the needs of the business and the needs of employees.

Instead, he claimed Britain is "paying the price of intrusive political regulatory engagement", and added: "Not only is it intrusive but it's short-lived in that each generation of politicians is seeking a silver bullet when it comes to meeting people's needs in retirement. And their silver bullet has to be different to the one invented by their predecessor yet often it's a predecessor within the same party".

He pointed out, for example, that the current Labour government "gave birth" to stakeholders earlier this decade and now is developing NEST.

"How on earth can the financial services industry, employers, employees and customers plan for the next 30-40 years when the infrastructure keeps being dug up every three to four years. It's nonsense. Politicians should not be engaged in that level of detail, they should not be designing employee benefit programmes and they should not be designing the products commercial companies will sell," he argued.

That said, Pickering admitted he believes an employer should have the right to make membership of a pension scheme a condition of employment subject to certain standards of government, as this includes some test of suitability.

"My fear about mass auto-enrolment is that there is a real danger we lose that important test of suitability. If I'm running a small business and auto-enrol my employees into a 60-70 year savings contract, can I hand on heart say that is suitable for them? If I can't, who is going to take that responsibility?"

Instead, Pickering suggested the government "got it about right" with stakeholder pension plans, and said he would be comfortable with the government taking the next step and requiring an employer contribution, provided there is a small business exemption.

"I think it is testing credibility to breaking point to say that we should auto-enrol every employee of every employer into a savings product which is not tested for suitability", he added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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