No surprises expected in Pensions Bill

The industry does not expect any surprise inclusions in the Pensions Bill, which is due to be announced in the Queen’s Speech on Monday (14 October).

The government has already made it clear that three main policy areas will be addressed – the implementation of the pensions dashboard, collective defined contribution (CDC) pension schemes and the defined benefit white paper.

Most industry professionals believe that these will make up the bulk of the bill and there probably will not be any unexpected inclusions.

Despite the expected introduction of the DB white paper, it appears unlikely that policy to legislate for DB consolidation vehicles, such as the Pension SuperFund and Clara-Pensions, will be forthcoming.

In July, the Department for Work and Pensions (DWP) said that it needs “a bit more time” on DB consolidation as it is “a really technical and difficult area”, while The Pensions Regulator (TPR) estimated that its assessment of the two emerging superfunds would be completed “by the end of the year”.

The pensions dashboard has been continuously pushed back since it was proposed in 2014, and many in the industry believe that its introduction is the most important area of the Pensions Bill to improve the member experience.

Aegon pensions director, Steven Cameron, commented: “Of the three Pensions Bill topics, the aspect of greatest and most wide-reaching importance is that concerning pension dashboards.

“While the industry working with the Money and Pensions Service Delivery Group can press ahead with many aspects of dashboard preparation, legislation is needed to compel all pension schemes and providers to supply comprehensive data and also to make sure that state pension information will be included.

“Without these elements, dashboard data will be full of gaps which could disillusion early users, losing the opportunity to turbo boost pension engagement.”

Now Pensions director of policy, Adrian Boulding, agreed: “It’s vital that the Pensions Dashboard makes it easy for members to consolidate small pension pots, as we need to start getting the huge growth of deferred members from auto-enrolment under control.”

However, The People’s Pension director of policy, Gregg McCymont, warned that the availability of data was critical to its success.

He noted: “To be a success, legislation to compel providers to supply their data is vital – legislation we’re still waiting for and need to see in the long-awaited Pensions Bill, that we hope will be announced in the Queen’s Speech.

He added that the bill should “go a step further” and ensure that all commercial dashboard providers “operate to a fiduciary standard” to make sure that the best interests of savers always come first.”

CDC legislation could be imperative for companies that want to use that type of scheme but may not impact as many savers as the dashboard.

“New laws are deemed necessary to allow CDC pensions – which tend to target a level of income in retirement without offering explicit guarantees – to be offered in the UK," said AJ Bell senior analyst, Tom Selby. "Royal Mail has pledged to shift its members to a CDC scheme once the rules are in place, although there has been little sign of significant demand from other employers."

Commenting on what the bill may include, Selby noted that it may include policy making mid-life MOTs mandatory.

He continued: “Pensions Minister Guy Opperman has also thrown his weight behind ‘mid-life MOTs’, a financial health-check carried out by some employers voluntarily for those roughly in the middle of their working lives.

“A Pensions Bill could turn this into a requirement, potentially meaning employees would be entitled to a range of in-work guidance on a variety of issues, including their finances.

“The pensions minister has also suggested a new Pensions Commission will be needed to take automatic enrolment, the government’s flagship retirement reform, into its next stage.

“While this is unlikely to appear in the Queen’s Speech, any future commission must encompass the entire pensions framework, including tax relief, and focus on simplification and encouraging more people to save for retirement.

“We are unlikely to see significant upheaval for people’s pensions in the Queen’s Speech.

While changes to things like reform of pension tax relief and abolishing tax-free cash have been mooted by ‘think-tanks’, they would require significant consultation.

“Similarly, major changes to the state pension – for example a further increase in the state pension age or change to the triple-lock – is extremely unlikely.”

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