UK - Alan Pickering's Simplification Review will be hamstrung by a power struggle between the department for work and pensions and the Treasury, experts fear.
Consultants also believe that to achieve genuine simplification Pickering would have to recommend measures that work and pensions secretary Alistair Darling would find politically unacceptable.
They maintain that radical measures which are likely to be vetoed would include:
- Restoring compulsory membership of pension schemes.- Removing the earnings cap.- Stabilising the balance of power between employer and trustees.- Abolishing contracting-out which would break the link between state and private pensions.- Amending accrued rights to reduce compliance burdens and red tape.
But Deloitte & Touche head of investment services Tony Osborne-Barker believes Pickering is facing an uphill task because the government “does not understand pension schemes”.
He added: “The issues that need to be simplified are unlikely to be included in Pickering's review because they are out of his hand. More importantly, they are out of Darling’s hands and DWP's.
Ultimately it is the Treasury which is driving this process. And unfortunately pension schemes – despite being a hot topic at the moment – are not a vote winner in the life of a parliament.
These issues would take a 10-15-year plan to change.”
Towers Perrin senior consultant Mike Hammer said stabilising the balance of power between employer and trustees, abolishing contracting-out and amending accrued rights would bring schemes enormous savings in legal and actuarial fees.
However, Hammer added: “But I don’t think Pickering will address these areas.”
Hammer pointed out that previous “independent” reports – such as the Myners Review – have been edited by the government before publication. This allows the government to accept the recommendations wholeheartedly because contentious points have already been removed or revised.
Former chairman of the Association of Pension Lawyers Robert West said the result of the simplification review is likely to be limited unless Pickering’s recommendations could be incorporated successfully with the Inland Revenue’s tax review.
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