The UK government will bring forward a Pensions bill which was confirmed in the Queen’s speech – the event on 14 October marking the opening of a parliamentary session and outlining the government’s plans.
The proposed bill is related to pension schemes, but its implementation will depend on Brexit and the final say rests with members of parliament (MPs).
It aims to provide a framework for the establishment of: the long-awaited pensions dashboards; the regulation and operation of collective defined contribution pensions (CDCs); tougher criminal offences with a maximum of seven years’ imprisonment and a civil penalty of up to £1m ($1.2m, €1.1m) for company directors who neglect defined benefit (DB) schemes.
But issues such as the extension of auto enrolment to those aged 18, and the regulation of DB superfunds, which allow the consolidation of smaller final salary-type pension schemes into larger vehicles, do not make an appearance in the bill.
Many absences
“This bill is notable more for the things that have been left out than for what it contains,” said Steve Webb, director of policy at Royal London.
“The absence of vital measures on automatic enrolment and on regulating new ‘superfunds’ is a sign of a battle inside government where the Treasury once again has defeated the [Department for Work and Pensions (DWP)].
“As a result, the vital expansion of automatic enrolment is now on hold, and the regulation of pension superfunds has been left in regulatory limbo.
“It is one of the biggest failings of UK pension policy that the department with lead responsibility for pensions can be thwarted in bringing forward sensible reforms by an over-mighty Treasury which has no vision for pensions.”
Rachael Griffin, tax and financial planning expert at Quilter said: “Some of the policies outlined today, like the pension bill, are simply long-awaited legislation that have been placed on the back burner as government has been entrenched in what seems to be the never-ending Brexit debate. Other personal finance policies such as social care were given a cursory nod.
“Meanwhile, some subjects such as the impact on pension allowances and inheritance tax were notably absent from the speech and we’re none the wiser as to what the current government has in mind with these topics.
“For those making financial plans for later life, this parliament has been a nightmare. So many policy changes have been mooted, but few have come to fruition.
“It leaves savers and investors playing a guessing game about how to manage their money. And this speech is not going to give them any further clarity.”
Not all bad
Tom McPhail, head of pensions policy at Hargreaves Lansdown, said: “The bill contains CDCs provisions which will enable the Royal Mail to press ahead with their plans to develop this new half-way house type of scheme.
“CDC schemes give members some certainty over their future benefits, without the full guarantees you get from a final salary scheme. Whether any other employers follow the Royal Mail lead in the future is uncertain; there’s currently no sign of a queue forming.
“Pension dashboards will enable pension savers to log into their chosen pension provider and view all their retirement savings accounts in one place. It’s a bit like open banking but for pensions.
“The key to making it work is to force all pension providers to open up their data, which this legislation will now do. Delivery of the dashboards may still be a few years away but, in the end, it will help with planning and cut down on lost pension pots.
“It won’t, however, give individuals the right to ask employers to pay their contributions into a pension of the employee’s choice, so there will still be the problem of increasing numbers of pension pots every time someone changes jobs.”
Additional measures
The Pension Schemes Bill also dwells into harsher penalties for employers and greater abilities to stop pension scams.
“Regulatory powers in the bill will give The Pensions Regulator more powers in taking to task employers who may be neglecting their final salary schemes in favour of paying dividends out to shareholders,” McPhail added.
“It will help strengthen the protection of employees guaranteed pensions, and hopefully cut down on the kind of scandals such as we’ve seen with BHS and Carillion in recent years.”
Scammers beware
But Tom Selby, senior analyst at AJ Bell, believes the government has not been prompt enough when tackling pension scams.
“The government’s response to the rise of pension scams has been welcome but far too slow, leaving millions of people at greater risk of falling victim to fraudsters.
“This latest intervention, if it becomes law, was first proposed in 2017 and should strengthen the ability of pension providers to refuse a transfer where there is evidence the scheme someone is moving to is being used to facilitate scam activity.
“Previously, there has been a real tension between the right of savers to move their money to a different scheme, which is clearly very important, and the responsibilities on providers in blocking transfers to suspect schemes.
“Addressing this tension will help ensure fewer people fall victim to pensions fraud.”
Even more complex
Quilter’s Griffin added: “Whatever flavour of government comes in, we urge them to be more understanding of personal finances. It is vital that people are incentivised and encouraged to take control of their money and plan for the future, and certainty about tax and savings policy makes that easier.
“For those reviewing their finances now, it is more important than ever to seek professional financial advice in order to make informed financial plans. Policy surrounding our finances is already complex, and this Parliament has only exacerbated that.”
The UK government, however, said it will present its budget on 6 November 2019, and Steven Cameron, pensions director at Aegon, hopes that some of the “pressing priorities which need urgent attention” that were left out of the Pension Schemes Bill, will feature in it.
