Certainty will emerge from chaos

If you thought benefits could not get more complex, think again

Nothing is ever straightforward in the world of benefits, and I am beginning to understand why calls for simplification of our pensions system have so often gone unheeded.

At times it feels like we are a hostage to the complexity of our pensions system. Like the hydra’s head, ministers try to cut away one source of complexity and another sprouts in its place.

So here we are, at the dawn of a new pensions contribution system, which has employers with large numbers of high earners in final salary schemes scrabbling around for solutions that avoid their staff getting hit with massive tax bills, digesting the news that everything is to change again in future.

Not only is the future of National Insurance up in the air, and with it the salary sacrifice solutions that intermediaries have used to ease the cost of implementing benefits, but some are suggesting the planned reforms could lead to the end of 40 per cent tax relief for higher earners. Just when the pensions industry thought it had got away with securing much of the tax relief that goes on pensions, the issue is back up for grabs. If it is rejigged towards lower earners, let’s hope what relief there still is all remains within the private pension system.

What’s more, increasing the state pension age in line with longevity means knowing when you will actually retire will become a movable feast.

Merging the operation of NI and income tax is going to take a long time, and we can expect some level of financial planning blight in the coming years. A clear timetable for implementation should be a high priority. But that delay also means there is still life in salary sacrifice for years to come.

And the Government is clear that the shift to a £140-a-week flat rate pension will be gradual too, again, creating mixed messages for different groups of employees for years to come.

But despite all this extra complexity, the public will be in a clearer position in future. Today’s 20, 30 and even 40 year olds will know it is in their interests to save.They will know that the NI system isn’t really insuring them against anything and rather than relying on wafer thin political promises, they will know for certain that their state retirement is a moveable feast.