Following the appointment of Laura Trott this week as the UK’s new pensions minister, the Association of Consulting Actuaries (ACA) chair, Steven Taylor, has called on her to favour increased flexibility in the public policy approach to boosting pensions and savings during difficult economic circumstances.
In a letter – copied to the Treasury – Taylor highlighted that any changes to the pension tax regime that may be under consideration should not be yet another ‘tweak’ that further undermines pension savings or undermines workforce retention. Changes should be thoughtfully considered and properly consulted upon.
Whilst in the longer term adequate pension saving for millions of people will require incremental increases in defined contribution (DC) pension contributions, he said, “this is currently an extremely challenging time for public policies to make new requirements”.
He said the new minister should carefully extend automatic enrolment (AE) provision over the next few years but, given it may not be desirable to rapidly raise minimum AE contributions, should also consider more steps to allow long-term savings to be used more flexibly when and where they are needed.
“We strongly support the early extension of [collective defined contribution] CDC schemes to a wide audience as one means to boost pension savings,” he added.
“Additionally, ministerial statements need to spell out time and again the kind of levels of regular voluntary contributions that savers and employers need to aspire to in order to deliver adequate and improving retirement incomes in the years ahead. This would become even more important if full inflation linkage to state provision is challenged,” he continued.
Following the Department for Work and Pensions’ (DWP) consultation on the new funding and investment regulations, the ACA is looking forward to working closely with DWP and The Pensions Regulator (TPR) to help ensure that regulations and a new funding code is put in place that delivers for all stakeholders – providing strong reassurance to sponsors, members and trustees, Taylor said.
“The need to address the potential for unintended consequences is significant and this requires that there remains continued, appropriate flexibility in how long-term commitments are sought and delivered. Importantly, the policy response to recent LDI experiences must be proportionate,” he noted.
As for Pensions Dashboards, the ACA strongly supports the desire to better communicate to savers around where their savings are and how they are accumulating, Taylor said. “But, given the financial pressures on employers and of the workload on trustees, a lot of which flow from new legislative and regulatory requirements, the ACA questions whether proceeding too quickly with dashboards could be counter-productive and, as such, risk damaging an important initiative,” he added.
“We are worried that the complexities in delivering dashboards that will provide reliable figures upon which savers can make important decisions are currently being under-estimated. We believe now could be a good opportunity for the new minister to pause and reflect on whether there should be further easements to the timetable that might better ensure strong outcomes are delivered immediately from day one following their launch,” he said.
Patrick Bloomfield, partner and senior actuary at Hymans Robertson, said that Trott has entered her new post a little over a week before the latest fiscal statement and faces immediate challenges on balancing the current cost of living crisis with adequate savings, benefit security and supporting business facing an increasingly tough economic climate.
“We urge the incoming pensions minister to listen to industry concerns about implementation of existing policies. There is widespread support for current policy objectives on climate change, Triple Lock, Pension Dashboards, the DB Funding Code, Automatic Enrolment and Collective Defined Contributions. But we’ve all witnessed the impact that poorly thought through government fiscal policy can have on the pensions industry,” Bloomfield said.
He called on the new minister and her team at the DWP to “take their time and entrain regulations that will deliver what the UK really needs to save for later-life over the long-term, and help close the UK’s gender and ethnicity pensions gaps”.
Bob Scott, senior partner at LCP, added: “There is also good work that needs to be continued. Her predecessor Guy Opperman made good strides around extending CDC’s, putting ESG issues firmly on pension scheme agendas and getting lift off for dashboards. These are all issues that the industry still needs help to navigate and complete.”
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