On his hopes and expectations for what the Government will announce in the Spring Budget, Paul Waters, Head of DC Markets, Hymans Robertson, said: “Pensions Minister Paul Maynard has said the Spring Budget might contain an update on the lifetime provide model or ‘pot for life’. But there are a number of other initiatives in play to tackle our fragmented pensions system, such as consolidation and the pensions dashboard, which should be given time to deliver first, before pot for life. Only then will we know if we’re tackling the right problem. Radical developments like the lifetime pension model should be longer term policy considerations.”
“We would welcome confirmation that the triple lock will stay and the Lifetime Allowance (LTA) will go. Now is not the time to tinker with the triple lock, which is a lifeline for so many pensioners. And the LTA was an unwelcome disincentive to pensions saving.
“I also hope the Government will confirm the date for the implementation of the new Auto Enrolment thresholds and eligibility criteria. This change will help improve pension adequacy for millions of lower-paid people. Without a clear timetable for implementation, it leaves employers and providers unable to plan effectively, and results in lower pension saving for those who need it most.
“One concrete reform I would love to see is the introduction of Automatic Enrolment credits for carers, which would help reduce the gender pensions gap for a more equitable pensions system. And the Government needs to set out a plan to deliver adequacy from DC, phasing higher contributions by default to at least 12% and reforming the earnings thresholds to be inclusive.
“On CDC, I’d like to see the Government build on the good work done to date for Royal Mail, and introduce a framework to enable different forms of collective DC to be introduced, allowing a range of DC risk sharing approaches to be adopted by employers and providers to meet the varying needs of savers. We welcome the Pensions Minister’s intention to consult later in the year on whole life multiple-employer schemes. This consultation should be broad in nature and enable the assessment of a range of DC risk sharing designs to be covered which could be delivered as different flavours of CDC.
“It would be good to see the Government support progress on clarifying the advice/guidance boundary. Implementing the targeted support proposals in a comprehensive way as quickly as possible will enable the industry to much better support people who need help with their pensions but financial advice is not practical.”
“Finally, my dream would be the announcement of a fully independent pension commission with unequivocal backing from all political parties to develop long term policy for UK retirement.”
Commenting on the Chancellor’s proposals to make pension funds to reveal more about their investments, Alison Leslie, Head of DC Investment, Hymans Robertson, said: “The Chancellor’s initiative to disclose investment within the UK is aligned to the Mansion House reforms. The FCA will be concerned that this disclosure may lead to an expectation that more be invested in UK assets where potentially the investment case for doing so doesn’t stack up. There is a friction here potentially between the ambitions of Mansion House and the FCA’s duty to make sure initiatives protect members and the market framework.
“Return drivers are the key consideration of asset allocation decisions alongside diversification and risk management. If the investment case stacks up recommendations will be made to invest in the UK. Many argue however that the case for significant investment in the UK does not currently exist.
“The announcement on benchmarking against other schemes is not unexpected particularly against the largest >£10bn plus in assets. This will drive consolidation in the market. However, consideration still needs to be given to those schemes where, due to structure, it is and has been difficult if not impossible to move, for example those with GMP underpins. A solution to that has not yet presented itself and this remains a big problem.
“We look forward to the consultation to understand better how the Chancellor envisages various aspects of the measures will work.”
On her Spring Budget expectations for the DB market, Laura McLaren, Head of Scheme Actuary Services, Hymans Robertson, said: “Given the significant changes announced in the Autumn Statement on pensions and last week’s consultation on options for DB, it feels likely there will be minimal changes announced for the DB market. It would be good to see the focus on completing the pretty long list of existing DB policy priorities. DB scheme trustees and the pensions industry are already grappling with a lot – ‘Mansion House’ reforms, pensions dashboards, finalising the new DB funding regime, compliance with the General Code, GMP equalisation, pensions tax changes etc. Now isn’t the time for knee-jerk changes.”
On his hopes for a wider vision for pensions, Calum Cooper, Partner, Hymans Robertson, said: “We know the Chancellor has very little room for manoeuvre but there are pensions reforms the Government can make which cost nothing but just require conviction. For example, we know risk sharing can provide a huge ‘boost’ to pensions for the same money, while encouraging DB surplus to be deployed to improve adequacy and stimulate sustainable growth could be part of reviving DB and re-connecting generational wealth.
“I want the Government to be bold and make a statement of intent to re-instate the pensions ‘social contract’ to reconnect the generations. That would transform adequacy. We need to restore co-dependency, aligning the need of the next generation to save more with the wealth accumulated by previous generations. Such a transformation for prosperity requires long-term thinking and innovative product design, and action. It would be a bold and confident move for the Government to launch an independent pensions commission with this clear statement of intent. In the near term, a commitment to reforming TPR’s statutory objectives to encourage open DB pension schemes to thrive would be a great help.”
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