Albert Einstein’s observation that “everything should be made as simple as possible, but not one bit simpler”, could serve as the motto of the UK government’s attempt to reform the pensions industry. Essentially, the government has set itself the task of simplifying the complex area of private pensions.
As part of this task it set in train three co-ordinated reviews of different aspects of private pension provision – the Pickering review, the Sandler review and the Inland Revenue review.
Alan Pickering, a former president chairman of the National Association of Pension Funds was commissioned to carry out a comprehensive review of the rules and regulations governing private pensions. He reported in July with recommendations for simplifying the entire structure. The aim is to direct as much money as possible into the pension pot rather than into bureaucracy , and make it easier for employers to offer decent pensions to their workforce.
Ron Sandler, a former chief executive of Lloyds was asked to identify the competitive forces and incentives that drive the medium and long-term retail Investment business and to suggest policy responses to ensure that consumers are properly served. He was also asked to look at how the principles of investment proposed by the Myners review of institutional investment might be applied.
Finally a joint Inland Revenue/pensions industry review was formed to consider ways to simplify and streamline the pension tax rules. It has recently reported to ministers with a package of options to improve and clarify the rules to help employers, administrators and consumers.
All these initiatives are now being funnelled into a government green paper from the Department of Work and Pension, expected at the end of the year. The green paper will look at pensions policy in the round. It will focus on three groups: workers who can afford to save for retirement but are not doing so; people who are saving and whose position may be protected by simplifications in the
regulatory regime; and older workers who might benefit from opportunities to work and save for longer rather than facing the prospect of immediate retirement cliff edge.
Running side by side with the green paper is the continuing work of the Financial Services Authority (FSA) on the regulation of the selling of investments and pensions. The FSA proposes to ‘depolarise’ the bi-polar distribution system through which investment and pension products are sold. Here the sticking point is likely to be how independent financial advisers are to be paid.
In some cases events have driven policy rather than the other way round. Proposals from the Pickering and Sandler reviews, which include an entirely new Pensions Act, prompted the government to announce that it would publish a Pensions Green Paper later this year. And UK companies’ Gadarene rush to close defined benefit schemes in the wake of falling markets and in the shadow of the new accounting standard FRS 17 has given a new rationale to reviews already in progress. Peter Ford, head of pensions at Norton Rose and a member of the Pickering review team, points out that when the government commissioned the Pickering report the move from final salary to money purchase schemes was not on the government’s radar.
Pickering's proposals to ease the burden on employers by removing survivor benefits and indexing are now seen as a way to save UK DB pension schemes. Tony Ashmore, vice president of the Pensions Management Institute (PMI) says: “Only companies can provide final salary schemes – it is not something individuals can do for themselves. These proposals will allow employers to retain or redesign their schemes, thus stemming the tide of closures.”
If the plethora of pensions reviews has achieved nothing else, it has put a premium on the idea of simplicity. Last month, the NAPF launched it to provide its own policy paper, entitled ‘Pensions – plain and simple’. But, as Oscar Wilde almost said, pensions are rarely plain and never simple.

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