The letter directly states the 'enclosed' paper as 'a solution to the current pension problem'. The letter also states the paper will be 'a valuable contribution to the debate'. This is an acknowledgement of the value of the paper to the pension situation. The letter also states it 'will be useful to the Conservative Party as we continue to review are pension policy'. These are direct statements, which acknowledge I wrote the paper and that the paper is 'a solution to the current pension problem', and the word review means 'making change' reform the pension system.
https://dictionary.cambridge.org/dictionary/english/review
Many of the policies put forward in the paper have been used by the government. The main policy is to alter pension saving rates to influence the economy in terms of reaching economic growth targets, controlling inflation, keeping interest rates low, stabilising the financial system and making treasury cost efficiencies. Before the paper was written pension saving rates were not controlled and the ability to control inflation and keep interest rates low was not present. The paper identified the need to control the saving rate into pension schemes, which has remedied the situation.
Before the paper was written no other economist had stated that pension saving rates needed to be managed. Since the paper was written and the Conservative Party have been in power pension saving rates have been managed as the letter states the paper will be used to review conservative party pension policy and it has since implemented pension saving rate alterations, it identifies the paper I sent as being the source of the mechanism. I would want to know why inflation, interest rates and economic growth varied so much before pension saving rates were managed if this wasn't the first time it had been used as an economic control tool.
Many of the reform suggestions I put forward were direct alterations to the then Registered Pension Schemes Manual, which is the technical paper used to set regulations for pension saving. It is literally a word for word alteration to the Registered Pension Schemes Manual, which is now the Pension Tax Manual that has been used. There are many alterations such as the ability to pay back into a pension after income drawdown has occurred, which previously was not allowed. Not only does the letter state the paper will be used to review pension policy but there are exact word for word alterations to the regulations, which originated from the paper.
To give you an example of how much of a word for word alteration is shown in the book. There is a chapter in the book 'Modern Applied Economics' which directly quotes the existing regulations from the Registered Pension Schemes Manual suggesting changes which have since been made. I will quote below the chapter for you to see how the alterations have literally come word for word from the paper, which is now the book Modern Applied Macroeconomics. Basically part of the paper was to rewrite the what is now the Pension Tax Manual. They have directly used it word for word.
The extract of the paper is below. It is from Modern Applied Macroeconomics by Peter James Rhys Morgan. It is evidence economic control can be achieved through making alterations to pension regulation. They have used quite a lot of it.
"Could the way that pension payments are made be altered to fit in with the new individual pension saving method rather than the current pension system?
Details of the 3 methods of claiming tax relief.
RPSM 05101310 s191
‘There are 3 methods by which a member can receive tax relief on their relievable pension contributions. A member may not choose which method of tax relief applies to their contributions; this is determined by the method the pension scheme is allowed to operate under the legislation.’ (Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: The different methods).
RPSM 05101340 s191 (3) and s191 (4 and 8)
[s191(3)]
‘Situation 1 – occupational pension schemes
Net pay arrangements may be used if all the following criteria are met
- The pension scheme is an occupational pension scheme, and
- The member is an employee of a sponsoring employer of the pension scheme, and
- All the other contributing scheme members who are employees of the same employer are also receiving tax relief under the net pay arrangement.
We expect most occupational schemes will continue to use the net pay arrangements for making member contributions and receiving tax relief.
Situation 2
[s191(4 & 8)]
Net pay arrangements may be used if the following criteria are met
- The pension scheme is a public service pension scheme (such as the Principal Civil Service Pension Scheme or the Local Government Pension Scheme) or is a marine pilots’ benefit, and
- The member is an employee.
A marine pilots’ benefit fund is
- A fund established under section 15(1)(i) of the Pilotage Act 1983, or
- Any scheme supplementing or replacing such a fund.’
(Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: Which scheme can use the net pay arrangement).
Limitations to current NPAs.
- The scheme must be occupational.
- Employee’s can only be entitled to claim Net Pay Arrangements 'NPAs', if they are sponsored by the employer.
- Also all other members of the scheme are receiving tax relief through this scheme.
Changes for practicality.
- First allow NPAs to be claimed through tax allowance after the individual has paid their National Insurance Contribution 'NIC' (using this method the state pension is not affected through salary reduction), so through receiving a tax allowance (Specific pension tax allowance, CPR or Tax free account) it enables the NPA to be attained without employer’s sponsorship and on an individual basis.
- Also the individual's salary is not reduced unlike in salary sacrifice schemes so mortgage applications are likely to be more successful.
- Finally employers do not get the chance to pay less National Insurance Contributions through salary reduction (in salary sacrifice schemes) and then not pass the savings on to employees' pension schemes.
RPSM 05101350 (Note that this is only available if individuals are members of occupational pensions or public sector pensions).
‘Which individuals can make contributions under net pay arrangements.
Only an individual entitled to tax relief who is
- Both a member of an occupational pension scheme and an employee of a sponsoring employer for that scheme, or
- An employee member of a public service pension scheme, or
- An employee member of the marine pilot’s benefit fund
May have their relievable pension contributions relieved through the net pay arrangement.
If a third party makes a relievable pension contribution in respect of a member the contribution cannot be paid via the net payment arrangement. Tax relief will be available to the member but by way of a claim – generally through the Self Assessment system.
Where relief is given on relievable pension contributions through the net pay arrangement relief may not be given by any other method.
A scheme member can only pay contributions to an occupational pension scheme under the net pay arrangement if all the other members who are employees of their employer are also making contributions under the net pay arrangement. An employer can not choose to let one group of employees in a scheme pay contributions under net pay and other group pay contributions under relief at source.’
(Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: Individuals who can use net pay arrangements).
Changes for availability.
Allow anyone to have an NPA, through post NIC but pre income tax pension contributions. Offer a personal allowance to anybody that pays into a private pension scheme.
Flaws to this new system
- When income is lower than pension contributions the needed tax relief cannot be claimed through NPA.
This is a problem under the existing system and the current solution is to;
RPSM 05101360 s193 (4) States this as a limitation with the current system. It also suggests that the member of the scheme should make a claim to obtain the balance of the tax relief available on the contribution, this is generally done in the annual self-assessment system.
‘Claims for relief where net pay cannot be applied.
There may be instances where insufficient relief has been given through the net pay arrangement because
- The amount of relievable pension contributions paid by a member to one or more pension schemes operating the net pay arrangement in a tax year is more than the employment income they receive from the individual’s sponsoring employer(s) for the tax year
- It is not possible for the sponsoring employer or employers to deduct the whole amount of the contribution from the individual’s employment income.
In these circumstances a member may make a claim to obtain the balance of tax relief available on the contribution, generally via the Self Assessment system.'
(Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: Claims for relief where net pay cannot be applied).'
Since writing this paper the Registered Pension Schemes Manual 'RPSM' has been superseded by the Pensions Tax Manual 'PTM'. The Pensions Tax Manual is available at the UK Inland Revenue's website along with other technical papers including the Employment Income Manual 'EIM', which is the relevant technical paper for Retirement Benefit Schemes."
You seem to be telling us, he used it after he was no longer Chancellor. In what capacity did he "subsequently" "use" it, and what on Earth for?, may I ask.