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24 December 2014

Pensions Perspective: What would the ghost of pensions yet to come show me?

I was reading through some of the responses we have had to our new feature 'Pensions Perspective' since it was launched earlier this year. Feeling in a festive mood, I decided to indulge in a glass of mulled wine and a mince pie while watching my favourite film, and Christmas classic, 'The Muppets Christmas Carol'.

I must have nodded off, because all of a sudden I woke up and there in front of me was the Ghost of Pensions Past. After showing me his business card and providing me with a copy of his 'Statement of Professional Haunting', he transported me back to the time of Elizabeth I and the Poor Laws of 1597 and 1601, the first stage of the state becoming involved in the welfare of the poor. I was then catapulted to 1712 and the first official occupational pension scheme, the Civil Service Pension Fund, initially set up for the benefit of Customs and Excise officers on a 'pay-as-you-go' basis. Through the eighteenth century it was altered to include other civil servants, and the Civil Service Superannuation Act 1834 made the scheme non-contributory and extended membership to other state employees such as teachers.

We bounced through the start of the 1900s catching the introduction of the 1908 Old Age Pension Act and the 1911 National Insurance Act. The number of Finance and Social Security Acts through the 1900s blurred my vision, but big changes came in 1970 when the Finance Act 1970 introduced a new code of tax approval for pension schemes. The Social Security Act 1973 provided for the preservation of benefits in occupational pension schemes, as well as cancelling the Graduated Pension Scheme. This was replaced under the Social Security Pensions Act 1975 with the State Earnings Related Pension Scheme effective from April 1978.

The Finance Act 1987 introduced the framework for personal pensions, and the Ghost and I paused at the introduction of SIPPs in the 1989 Budget and read fondly the simple wording of Joint Office Memorandum 101, which for the next ten years was the only guidance on investments allowable within a SIPP.

We sailed the murky pensions' waters of the 1990s seeing the impact that both Maxwell and Barber had had on the pensions' world, as well as the scandal of pensions' mis-selling, and there was a change of name - the Superannuation Funds Office was now the Pension Schemes Office to avoid confusion with the Serious Fraud Office (SFO)!

By the 2000s pensions ministers were coming and going like buses. I took one last look at the IR12 Practice Notes and the IR76 Guidance Notes before I was fast forwarded to 2006 and the launch of pension simplification, but it was anything but simple. I felt like I was drowning in pages and pages and pages of HM Revenue and Customs' manuals and changes, although the shining light on the tree was that connected party transactions seemed so much easier than they had been prior to 2006. There was also no longer a need to purchase an annuity at age 75, although this was shrouded in a cloud of doom with an 82% tax charge prevailing if anyone dared to die after age 75 with funds still held within a pension scheme. I was fast forwarded again and the 82% tax charge had dispelled leaving us with a 55% tax charge, but it still seemed a high price to pay.

I woke with a start, but did I really wake up? I rubbed my eyes and standing in front of me was the Ghost of Pensions Present. In this world we had had one pensions minister since May 2010. SERPS was gone, and a flat rate state pension was on the horizon. Compulsory pensions and auto-enrolment for all employees was underway, but there were rumblings of changes afoot creating a way to access all your pension funds in one go as well as proposed reductions to tax charges on death. There was much planning in Pensions Present's world not only in how we plan our pension affairs, but also in our wealth planning. Would all that glittered actually turn out to be gold?

With trepidation I opened my eyes. I looked around for the Ghost of Pensions Yet to Come somewhat excited at the pensions' world he would show me, but he never appeared. What would the Ghost of Pensions Yet to Come have shown me?

Ed, we at Pensions Perspective really think you need to take a break over the Christmas holidays!

However, your whistle-stop history tour through pensions past has highlighted that over the last 400 years there have been many changes to pensions through both state and private provision, most of which we now just take for granted. This year has been an exciting time for pension provision and we hope that 2015 will be equally exciting. But we can only plan based on what we know - there are no Christmas visions, just good planning, expert technical support and great communication.

We in the City Trustees team hope that you will have an enjoyable Christmas break and come back to us in 2015 fully refreshed and ready to face these challenges.


Pension Perspective is a weekly feature from City Trustees, covering questions that our experienced sales and technical teams have received from advisers. The Q&A covers a range of subjects including property, pension contributions, protection, auto-enrolment and more.

City Trustees operates a free technical helpline for advisers for support with pension challenges. Tel: 0116 240 8731 or email:


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