POINTS OF LAW Forty years on
The past was definitely another country – especially as regards pensions, reminisces Robin Ellison, Pinsent Masons
- legal hyperactivity on pensions has contributed to the decline of pension provision in the UK; future developments are likely to see less law and better provision
- fining as a penalty is becoming more fashionable, despite profoundly unattractive unintended consequences
- separate requests for information by HMRC, insurers and regulators are inefficient and not consumer friendly. This needs reform.
The editor has let me write this column now for 40 years this month. In its early days, copy had to be typed, copied using carbon paper, placed in an envelope, stamped and posted. I lusted after an IBM golfball typewriter, then a daisywheel printer and a succession of antediluvian word processors, first using magnetic cards, then Amstrad disks, then floppy disks (3.5˝ and 8˝). There was no internet, so visits to the library were frequent. There was inflation, stagflation, surpluses and anti-franking. None of these words apart from the internet mean anything to anyone under 50.
This was not a golden age. Restaurant food was mostly disgusting, supermarkets had limited choice, it rained a lot, even photocopying was wet and it was fashionable to wear long hair and flares – and that was just the men. But in pension terms, there were some good things too. Defined benefit (DB) pensions coverage was increasing, and expected to do so indefinitely. You could learn pretty much everything about pension scheme law in an afternoon, even with long tea breaks with teacakes served by a tea lady on a trolley (the teacakes, not the lady). Regulation did not exist and tax was mostly understandable – and if you struggled, there was someone to speak to at the Inland Revenue who did know the rules and was helpful. And it was OK to include in this column the advice of my wise and glamorous assistant Portia, which is now unacceptable because of political correctness.
This column is now written by robots, all of them women: Siri and Cortana, and the recently recruited Alexa, so there are no more mistakes. Even with their cyborgian help, the next 40 years look hard to call. On the one hand, we may get lower investment returns, coupled with increased life expectancy, a need to work however frail we might be, reduced support ratios and populist politics. On the other hand, we might see increased DB pension provision through unfunded systems. And some things will expire through the principle of evolution: regulation, regulators (no, seriously), complex tax law and interfering politicians (maybe not). Meanwhile, I have promised the editor not to do more than another 40 years.
Think of the burden with which the labour of the world is saddled.
The next 40 years
Anthony Trollope wrote a satire in 1882 , The Fixed Period, about cutting pension costs in a novel which suggested that the magic age for compulsory euthanasia would be 67 or 68. It was a precursor to Logan’s Run, a film with a similar premise:
The Fixed Period … consists altogether of the abolition of the miseries, weakness and fainéant imbecility of old age, by the prearranged ceasing to live of those who would otherwise become old. Need I explain to the inhabitants of England, for whom I chiefly write, how extreme are the sufferings, and how great the costliness of that old age which is unable in any degree to supply its own wants? Such old age should not, we Britannulists maintain, be allowed to be. This should be prevented, in the interests of both the young and of those who do become old when obliged to live on after their “period” of work is over. Two mistakes have been made by mankind in reference to their own race – first in allowing the world to be burdened with the continual maintenance of those whose cares should have been made to cease, and whose troubles should be at an end … and the second, in requiring those who remain to live a useless and painful life. Both these errors have come from an ill-judged and a thoughtless tenderness – a tenderness to the young in not calling upon them to provide for the decent and comfortable departure of their progenitors; and a tenderness to the old lest the man, when uninstructed and unconscious of good and evil, would be unwilling to leave the world for which he is not fitted. But such tenderness is no better than unpardonable weakness. Statistics have told us that the sufficient sustenance of an old man is more costly than the feeding of a young one … Statistics have also told us that the unprofitable young and the no less unprofitable old form a third of the population. Let the reader think of the burden with which the labour of the world is saddled.
The book describes Trollope’s hero using a steam tricycle and anticipates a “steam bowler”, as a form of cricketing robot. He was probably just 125 years too early – steam cars and cycles are being talked about again now. And the Department for Work & Pensions (DWP) issued a paper in February 2017 that encourages employers and others to recognise increasing longevity and the need to work longer for a pension, as an alternative to forced euthanasia. Incidentally, Mr Amazon supplied a copy of Anthony Trollope’s book within seconds to my Kindle and without charge. How amazing is that?
Finally, the next 40 years will see us gadding about in flying cars, enjoying dealing with banks, insurers and HM Revenue & Customs (HMRC), all of which will answer phones (if there are phones) within four rings, treat callers with dignity and empower staff to make decisions. We will also have money laundering rules that will be applied to fraudsters rather than to us. (How do the pensions scamming guys manage to open bank accounts, when it is so hard to open a genuine one?) We will be astonished that 30 years before we thought regulators were a good thing – like those flared trousers. The good times are coming.
***We are just about to insert another piece in the futurology jigsaw puzzle – online convictions. If you evade a train or tram fare, or possess an unlicensed rod and line, prepare to be fined by Facebook. As a Daily Mail reader, or simply a nosy parker, you will also be able to have access to case listings and outcomes, so you can see what kind of neighbours you have got. To make sure vulnerable people are protected, all the proceedings will be in Plain English. If they manage to get it to work, maybe that could be adapted to the pensions world – although I am not sure it is a good idea, knowing the record, to allow regulators to impose fines electronically.
And while on the question of fines, it has been Christmas for regulators. The Financial Conduct Authority fined Deutsche Bank £163m for poor money laundering controls; the bank obviously had not checked the last three months’ gas bills properly. Even more preposterously, the Information Commissioner’s Office (ICO) proposed to fine 11 charities for breaching the Data Protection Act; they have already fined the British Heart Foundation and the RSPCA. Charities, of course, do not have shareholders or make profits; they have beneficiaries. So it is dogs, heart patients and 11 other kinds of victims suffering the effect of these fines. How absurd is that?
It is even more absurd when we learn that the ICO itself self-reported 14 breaches, some of them serious by its own standards, committed by itself, but with surprisingly no fines being imposed – and with no damning press releases being issued. Instead, without telling anyone, it ordered itself to take action to prevent further breaches.
(1) The hyperactive President of the United States is not as smart as he thinks he is. He signed an executive order at the end of January 2017 with a “one-in, two-out” requirement, so that in the US for every one new regulation, two existing ones must be removed. Of course, since March 2016 we have had a much better policy in the UK, where the government has imposed a “one-in, three-out” obligation on rulemakers. No, it does not work here either.
(2) HMRC, the Pensions Regulator and the Pension Protection Fund all have similar requirements for information, all in different forms and none of them consumer friendly. Having just become an HMRC scheme administrator, where I am acting pro bono as trustee for a charity pension scheme, and potentially exposed to tax liability emerging from pensions liberation, I am not happy at the repetitive bureaucracy involved in this – and even more uncomfortable with the unlimited personal liability for things I have no control over. The policy of all these organisations needs a profound rethink – especially since the DVLA system for consumers who need to tax their cars, and which integrates insurance, MOT certificates and tax, is now so brilliant. It shows it can be done if they try.
And we could do with a little less sanctimony from ministers and regulators who criticise the industry for struggling with the forthcoming industry-wide pensions dashboard when they cannot make their own.
Anthony Trollope, The Fixed Period, 1882