The industry has welcomed the speed at which the government’s pensions review is being implemented, saying its two-stage approach should lead to faster industry reforms.
The pensions minister Emma Reynolds is expected to hold the first meetings with the industry today as part of a pledge for a ‘big bang’ to stimulate growth in the economy. The pension review will focus on the actions needed to drive further investment from pension schemes into productive finance and private assets — helping to boost the UK economy.
LCP partner, and a former pensions minister Steve Webb said the two-stage review offers potential for faster implementation of pro-growth reforms. “Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill, before then exploring long-term challenges to ensure our pensions system is fit for the future”.
He added that the details of the Pension Scheme Bill, including in the King’s Speech last week suggests that this would include only a narrow range of measures, such as the creation of a Value For Money (VFM) framework to drive DC consolidation, measures on consolidating micro pension pots, a legal framework for Superfunds. and new duties on pension scheme trustees to look after members after retirement.
But he says that the Government is now suggesting that if the Pension Review decides that further measures could be introduced to ‘drive investment’, these could also be included in this Bill, rather than waiting at least 12 months for another Bill in another King’s Speech.
LPC says this review is likely to focus on the using the Pension Protection Fund as a ‘public sector consolidator’. This could potentially brin gtogether thousands of smaller DB schemes, giving it the size and scale to investment in longer-term assets. It adds that the review will also look at the potential to encourage DB schemes to ‘run on’ rather than de-risking with an insurer.
LCP says this approach could have multiple attractions to the government, including slowing the sale of gilts, as schemes move to buyout and sustaining productive investment for longer. It also has the potential to generate surplus cash to benefit corporate sponsors, DB members and potentially supporting investment into DC pensions.
Webb adds: “By operating a two-stage pensions review, with an early hunt for measures which could be added in to the current Bill, the Government has the potential for faster implementation of reforms which it believes would promote the ‘productive’ use of pension scheme finances.
“As a result, we are likely to see significant legislative changes across the pensions landscape in the next 12 months”.
Meanwhile The People’s Partnership chief executive Patrick Heath-Lay welcomed the review, saying the company “very much look forward to contributing to it over the coming months”.