Fans of interminably dull twitter debates will be relieved to hear the process of the UK leaving the European Union could drag on until Halloween (31 October).
However, the ‘flextension’ agreed between the European Union and UK Prime Minister Theresa May could be a nightmare for retirement policy as it will push key reforms down the legislative agenda.
Pensions Bill 2020?
The Department for Work and Pensions was holding out faint hopes of getting a Pensions Bill through the House of Commons in 2019. However, with the Brexit deadline pushed back that seems like something of a pipe dream, potentially leaving 2020 as the earliest opportunity to get vital legislation written into law.
Without a Pensions Bill, five central policies pushed by pensions minister Guy Opperman could face delay.
1. Pensions Dashboards
Pensions Dashboards are set to become a reality later this year on a voluntary basis, although the DWP expects it to take 3-4 years for the majority of pensions detail to be made available to savers.
A key part of making Dashboards useful and credible will be mandating that all schemes provide information.
While modern providers that are net receivers of pension transfers will have both the capability and incentive to offer up data voluntarily, other providers – particularly those administering older-style life policies – are likely to drag their feet.
It is therefore crucial that legislation is brought forward at the earliest possible opportunity to ensure Dashboards provide a genuinely useful service to savers.
2. Collective Defined Contribution (CDC) schemes
The DWP has given enthusiastic backing to Collective Defined Contribution, or CDC, schemes – plans designed to offer a halfway house between defined benefit, where the sponsor takes on all the risk, and defined contribution, where the risk is entirely on the member.
In fact the CDC design still leaves those investment risks on the shoulders of savers, although risks are shared across the entire membership. Advocates of CDC point to the potential for reduced volatility this brings, although members will have to sacrifice flexibility and choice as a result.
While demand for CDC appears relatively muted across the private sector, the fact Royal Mail are keen to adopt the structure for their 140,000 UK staff means getting the legislation passed is a key priority for the DWP.
3. Defined benefit (DB) consolidation
The Government wants to bring forward legislation to allow DB ‘superfunds’ to drive consolidation of sub-scale schemes. Although DB consolidation is possible at the moment, the DWP believes legislation is needed to ensure potential cost savings are maximised and members’ interests remain at the fore.
Pressure in this area has been ratcheted-up by the failures of some pretty high-profile scheme sponsors – most notably BHS – and subsequent demand for action by the influential Work and Pensions Committee.
The DWP has already committed to ensuring members of superfunds have equal protections to members of other DB schemes and addressing risks around the loss of employer covenant. All of this will, however, require new legislation.
4. Mid-life MOTs
Mid-life MOTs were first proposed as part of John Cridland’s review of increases in the state pension age.
The idea of mid-life MOTs is simple – by requiring employers to facilitate a financial check-up for employees, the Government hopes more people will be kicked into action and take greater responsibility for their financial futures.
This might involve anything from paying down costly debts, boosting pension contributions or seeking expert help from a regulated financial adviser.
There is debate about the point in time this should happen. While the DWP has suggested 45 might be the right age, there is an argument for ensuring people are given this nudge earlier so good financial habits are ingrained from a younger age.
However, without legislation there is no guarantee employers with various competing priorities will offer mid-life MOTs to their staff.
5. Pension scams
The Government is still waiting for legislative time to get two important pension scams interventions first proposed almost three years ago onto the statute book.
While the cold-calling ban introduced in January was a welcome step, measures to make it easier for schemes to block suspect transfers and harder for scammers to establish dodgy schemes in the first place remain in the stocks.
These are vital consumer protections and have already been delayed for too long. Sadly with Brexit now dominating the agenda we have no clear idea when they will see the light of day.
These articles are for information purposes only and are not a personal recommendation or advice.
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