Experts predict that Covid and its financial pressures on the government will mean that the expansion of the auto-enrolment is unlikely this year as are changes to the pension tax relief.
Aviva head of savings and retirement Alistair McQueen says: “Government finances are hugely in the red and household finances are under strain, especially as inflation rears its head. This will continue to dominate the political agenda, and constrain any big spending plans. We won’t see any big movements in the auto-enrolment rules at a time when businesses are focused on simply keeping their lights on.
“Pensions tax relief marked its 100th birthday in 2021. The temptation for the Treasury to drive reform in this area in 2022 will be strong, but the political challenges against acting will be stronger. There may be some movement at the margins – such as the annual allowance or lifetime allowance – but any bigger action would require even bigger political confidence at a time of national strain.”
A consultation on retirement options is expected next year, which will have an impact on the continued success of auto-enrolment.
B&CE, provider of The People’s Pension director of policy Phil Brown says: “We’re expecting a consultation on retirement options for auto-enrolment at Easter, which will be crucial in guaranteeing the ongoing success of auto-enrolment, while a fairer levy system to pay for victims of pension fraud is vital because, right now, this burden is being unfairly carried by master trusts and their millions of customers.”
Overall, the pension landscape is unlikely to change significantly say experts, but stakeholders see it as important that people be more engaged with their retirement plans. Therefore, without government involvement, it is up to stakeholders to find ways to encourage more engagement and savings.
McQueen says: “What we must push for is greater public engagement and confidence in their retirement plans. The advice gap remains huge. Fewer than one in ten adults seek financial advice each year. Nine in ten are flying solo, and often flying blind. In an age of individual responsibility, this is not a good mix.
“In the post-Brexit era, we need to see domestic legislators and regulators create a guidance environment that bridges this advice gap. Money Helper and Pension Wise are great and must be supported. But we also need to liberate the muscles of the providers to deliver more help and more guidance.”
The newly enhanced value for money assessment will be applied for the first time in 2022 to occupational DC schemes with less than £100 million. This assessment will require schemes to explicitly compare investment returns and value for money against three different alternatives.
Buck head of DC & wealth Mark Pemberthy says: “This will certainly lead to more trustees winding up their DC sections, either because a Master Trust offers better overall value for members, or because the effort needed to deliver and evidence good governance is no longer viable for them. The DWP could also expand the scope to include larger schemes in 2022, having an even bigger impact on consolidation in the DC market.
“Additionally, employers, trustees and members will increasingly be inclined to consider the purpose of their pension scheme and how it might reflect their objectives and beliefs. This is already quite obvious when it comes to responsible investment, the continued growth of ESG and investors taking more interest and involvement in how their money is invested as well as how underlying companies behave.
“This is now also reflected in the growing focus around whether a pension scheme is likely to generate adequate retirement outcomes for members and how this might vary for different membership groups – such as increased awareness of the gender pension gap.”
Employers are increasingly recognising that their employees have a wide range of financial goals and challenges that they can assist them with, and they are no longer solely focused on assisting their employees in saving for retirement according to Pemberthy.
Pemberthy says: “2022 will see continued growth in the use of short and medium-term saving plans alongside the workplace pension, such as the “Jars” schemes being trialled by Nest Insight. This will allow employers to support their employees in building up emergency savings and other shorter-term financial objectives, as well as save for retirement.”