This week in pensions: 20-23 September

The past week has been a busy one for the pensions industry, and even busier for the rumour mill, as we finish the week without a confirmed Pensions Minister, following the departure of the UK’s longest serving pensions minister, Guy Opperman.

The pensions industry described the news of Opperman’s departure as the end of a “period of stability”, highlighting his achievements on pensions dashboards, collective defined contribution (CDC), and more.

However, many have also warned that Opperman's successor will have "a lot on their plate”, with the majority of respondents to a recent small Pensions Age poll suggesting that the focus should be on DC adequacy concerns and auto-enrolment reforms.

Despite the lack of a confirmed Pensions Minister, there have been a number of announcements for the pensions industry to get to grips with, as the new Chancellor, Kwasi Kwarteng, confirmed plans to "accelerate" reforms to the pensions charge cap in an effort to "unlock" pension investments into UK assets.

Industry experts have warned that the changes may not be the 'silver bullet' hoped for however, instead calling on the Chancellor to review the long-term freeze on income tax allowances, as well as the pensions lifetime allowance and the money purchase annual allowance.

Furthermore, although the mini-Budget included a number of tax cuts, further changes may still be needed, with the Association of Consulting Actuaries recently urging the government to consider key reforms to pension tax relief, amid concerns over the complexity of the restrictions surrounding the current regime.

Efforts to tackle the NHS backlog have also begun, with Health Secretary, Thérèse Coffey, arguing that a “true national endeavour” is needed to tackle this issue, announcing a number of measures intended to address the NHS pensions crisis.

Introducing the policy paper, Our plan for patients, Coffey, As part of this, Coffey said that the DHSC has dedicated itself to “correcting” NHS pension rules regarding inflation to retain more senior NHS staff, as well as measures to "encourage" pension recycling.

The industry is also working to understand the impact of the Bank of England's latest interest rate increase, with experts warning that while this may be a positive sign for defined benefit (DB) funding levels, it could also have an impact on the ability of sponsoring employers to fund DB schemes.

Savers are also facing a "considerable" inflation risk amid the rising cost of living, with a recent report from the Pensions Policy Institute (PPI) warning that savers could see their pension pot values eroded in real terms if investment returns do not match rising inflation.

This is perhaps particularly concerning in light of the latest figures from the Office for National Statistics, which showed that despite a record increase in active membership, private sector defined contribution (DC) assets remained unchanged over Q1 2022, attributed to poor investment returns.

And shortfalls are unlikely to made up via member contributions, as recent research from Legal & General Investment Management (LGIM) found that 69 per cent of lower earners can’t afford to make any contributions due to the rising cost of living.

While there may be some uncertainty still in the air as the week draws to a close, it is clear that there are a number of challenges that the pensions industry will need to face in coming weeks.

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