Pensions

Government urged not to introduce law to equalise benefits for cohabitees

Extending survivor benefits to unmarried partners would increase liabilities and be a lawyers’ paradise according to PP research.

This week 112 respondents took part in Pensions Buzz, to see the results click here.

The government should not introduce a law that equalises survivor benefits for cohabitees, 58% of Buzz respondents say.

Respondents argued it would be difficult to decide what the threshold for awarding survivor benefits should be and any law would lead to the closure of more defined benefit (DB) plans.

The issue has gained more prominence in light of the Supreme Court’s ruling on 12 July in the Walker vs Innospec case.

A commentator said: “In common with the tax regimes, the state recognises certain relationships and all individuals have the choice to register the relationship.”

A different respondent observed any such move in this direction would be “a lawyer’s paradise” and warned “trustee deliberations on the disposal of death benefits would never end, nor would the litigation”.

However 37% disagreed. As one respondent explained: “Despite one’s views, the younger generation seem to accept that living together is OK and one does not need a licence to be a couple… we should recognise such and amend the rules to accommodate.”

 

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Nearly two thirds or respondents (65%) believe the re-appointment of Frank Field as chairman of the Work and Pensions Committee (WPC) will be positive for occupational schemes.

Several pundits praised Field’s intelligence and understanding of pension matters.

One said: “The one thing in life that you cannot buy is experience. We may not all agree with some of the things that he comes out with, but he knows what the industry is all about.”

Another added: “Frank Field may not always be right, but he always cares. He does not see the position as a stepping stone in his career; he actually wants the job.”

Only 11% were against his appointment but there were interesting reservations.

“He has a habit of grandstanding and a disinclination to take a balanced view,” said one. 

Another said: “He is too old, ironically, for such a technical job! How he dealt with Green showed a lack of understanding of pension scheme facts.”

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Six out of ten respondents were against the idea of replacing tax relief with a bonus-based structure to help low earners.

The proposal, which was made in a paper on auto-enrolment by Michael Johnson, was rejected on the grounds it would add complexity to the system while others suspected it was a way for the Treasury to save money.

A commentator said: “It would be hard to agree with anything that man proposed. Much of his thinking on pensions seems to be fundamentally flawed and politically-determined.”

Another added: “This would create a political football out of a serious issue. We can argue about the level of tax relief available and to whom, but the basic principle of tax relief as a saving incentive needs to remain.”

Conversely, 19% were supportive of the idea – believing tax relief should be directed at those least able to save.

“Tax relief is a big incentive for higher rate taxpayers but less so for lower rate. A bonus or top up system may prove more of an incentive,” said one.

Just over a fifth of respondents were undecided.

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Those surveyed were split about whether or not the Financial Conduct Authority (FCA) should issue some guidance to help the market design decumulation products with 42% of respondents in favour and 39% against.

Among those in favour, one explained they thought the FCA needed to be a little more assertive when it came to the at-retirement market.

A pundit said: “The role of the FCA is not just ‘the stick’; it needs to ensure that it provides a bit of ‘carrot’. The market would take an age to come up with solutions because the average layman is far too uneducated to even know whether or not he needs certain guarantees, and so won’t be asking for them.”

While practical help is always welcome, it should not be too prescriptive, another warned.

On the other side, several thought involvement from the FCA would lead to bad outcomes for consumers.

“If there is a need, the market will develop. You cannot impose a politically-desired outcome on the market; it will fail like stakeholder pensions. Remember them?” said one.

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This question generated passionate answers from respondents, who were divided on the question of whether or not the law strikes the right balance between trustees and shareholders with 46% replying “yes” and 45% “no”.

Among those who thought the law did currently strike the right balance, a variety of explanations were given.

One respondent observed the balance between shareholders and members is fine, but the balance between other creditors and members needs to be looked at.

“Other creditors aren’t routinely asked to extend payment plans when the company is finding it inconvenient to pay its debts,” they said.

A different one argued members, unions and the media have unrealistic expectations about investments only having an upside.

However those who think the law is biased said it was overwhelmingly biased in favour of shareholders. 

“We have seen examples where plainly the shareholders rule – we need the law to be specific on what is allowed and what is not, but realistically it will not happen in the near future.”

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