Pension companies are calling for the government to urgently publish a ‘sensible and workable’ roadmap to implement the bumper package of pension reforms issued in the wake of the Chancellor’s Mansion House speech last week.
A raft of consultations and proposals included further details of the government’s new Value for Money framework for defined contribution schemes, a new approach to dealing with small deferred pension pots, extending the retirement options offered to members of trust-based schemes, alongside plans to develop CDC pensions to include multi-employer master trusts and decumulation-only options.
This package of announcements is designed to improve member outcomes while also encouraging large DC schemes to invest in private equity – but the industry pointed out these major policy changes come when it is also preparing for the introduction of pension dashboards and a significant extension to the AE framework.
Aegon pensions director Steven Cameron says: “Aegon welcomes the Government’s drive to boost investments made by defined contribution pension schemes in private equity and other illiquid investments. This is an underpinning aim behind a massive ‘all guns blazing’ package of proposals unveiled the day after the Chancellor’s Mansion House speech.
“Each of these policy proposals are major in their own right, and all have their own admirable aims and merits as well as many challenges and questions yet to be answered. But they are all interlinked and their success will be affected by other ongoing developments such as pension dashboards. Charging ahead without a well thought-through over-arching plan could lead to chaos.”
He says: “Alongside individual consultations, we are calling on the Government and regulators to engage with the industry to come up with a sensible and workable implementation roadmap. This needs to take into account interdependencies and what makes sense to focus on implementing first.
“We see great value in getting pension dashboards up and running, to allow individuals to see all of their pensions in one place, online. This should be done before attempting to contact millions of customers as part of a sweep up of pots under £1000 into a small number of consolidators.”
Cameron adds that getting the value for money framework agreed and bedded in should also be a priority, though this needs to be fully aligned with the FCA’s Consumer Duty, which goes live at the end of July.
He says: “The Government and regulators want an outcome of the value for money framework to be that poorer value schemes wind up and consolidate into better value, larger schemes. Surely it makes sense for scheme consolidation to happen before attempting consolidation of small pots at individual level. The concept of attempting individual and scheme consolidation at the same time is mind bogglingly complex!
“We support making early improvements to the range of retirement options offered to members of trust-based schemes. But it’s too early to be consulting on offering them access to a decumulation-only CDC arrangement when these haven’t yet been legislated for, let alone fully designed or set up in practice.
“Pensions are some of the longest term investments individuals make, and while Government, regulators and industry should always be looking for improvements, a mad rush to implement too much, too soon without a full understanding of the consequences could be highly risky.”
