HOT TOPIC
(HMRC) has agreed a way to deliver recompense for the net pay anomaly but will only begin to pay ‘top-ups’ from 2026. The AE upgrade Despite current problems regarding the cost-of-living, the AE upgrade promised for the middle of the decade (back in 2017) has still to be confirmed by the Department for Work and Pensions (DWP). It seems unlikely that legislation will be enacted, and regulations put in place until well after the end of this Parliamentary term, in 2025. It’s been confirmed that the delay is due to a data issue relating to systems and processes. Meanwhile, up to 850,000 pensioner households are missing out on pension credits, a top-up to the state pension of up to £60 per week and a ‘door to more’, by way of everything from council tax assistance to free TV licenses. The DWP is unable to further automate the application process because it cannot extract data from certain systems. Nor can it access the data stored on pension income and savings from the private sector. The promise of universal advice, issued by George Osborne in 2014 has morphed into pension guidance from Pension Wise. The sessions cannot deal with our individual circumstances and must be generic, because those giving guidance have no access to the correct information. What’s driving the problems? So what is making pensions so very hard? One recurring theme is an absence of trustworthy data. The most obvious example is, of course,
the pensions dashboard, to which many pension providers seem most reluctant to share the data they hold on members and policyholders. It’s partly a quality issue, partly a worry that the data may be misinterpreted and partly a fear that the data may be intercepted by pension scammers. For whatever reason, those who hold pension data are looking for reasons to extend the delay on dashboard delivery. Data sharing is the problem. So what is making pensions so very hard? One recurring theme is an absence of trustworthy data Perhaps the most emotive dashboard issue is the sheer number of pots people build up during a career. The three most popular workplace pensions – Nest, People’s Pension and NOW pensions – have between them over 17.5 million pots, the average size of which is below £1,000. Small pots are a pain for members and providers alike, and two years ago the pensions minister, Guy Opperman, set up a small pot working group to address this. The principal providers have either refused to share data or are arguing over an obscure piece of pension law, known as the normal minimum pension age. You’d have thought this would be standard, but it isn’t, because like so much
else in pensions, it can be protected, meaning that some people might find themselves losing rights if they were moved from pension to pension. Data sharing is again the problem. As for the net pay anomaly, payroll people may wonder how it was that two different means of paying tax relief were created in the first place. The answer is that the Treasury controls one half of the pension map while the DWP controls the other. In the Treasury hemisphere, relief at source holds sway, in the DWP’s, it’s net pay. To add to this complexity, HMRC cannot operate a P800 solution to top-up pension contributions overpaid by low earners in net pay schemes. Its alternative solution will take until 2026 before any extra money reaches saver’s pension pots. Finally, let’s look at pension credit, a means tested benefit that 30% of potential claimants aren’t claiming because they don’t submit their personal data to the DWP for assessment. Several reasons are put forward: that the people entitled to it don’t know about it, or find it hard to claim or think that in claiming they will lose out elsewhere in the pensions system. What’s the solution? Pensions are data rich, but – unlike other areas of financial services – people aren’t getting access to their data in ways which are useful to them. We hear many calls for financial empowerment, but without the data on which to take decision, it’s hard for people to make informed choices. In my opinion, financial empowerment will follow the production of relevant and timely information on pensions, something which is currently lacking. n
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| Professional in Payroll, Pensions and Reward |
Issue 81 | June 2022
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