Reflecting on the current environment, the next few years are likely to be even more challenging. The clear message from politicians, civil servants and regulators is that, more than ever, there is a pecking order in what gets attention. And pensions is not at the top.
- Priority 1 is clearly Covid-19. With implications the likes of which the world has never seen outside of world wars, it is the defining challenge for a generation.
- Priority 2 is Brexit. It was the highest priority for the country before the pandemic, and we were already seeing other issues taking a back seat.
- Priority 3 has to be critical legislation. A Finance Act to implement a Budget is an obvious example, perhaps legislation covering health, policing or defence.
- Where does pensions fit into this? At Priority 4 or below.
If the industry’s requests need to be moderated even more than normal, what should we be calling for and why? In my view, it’s things which make a material difference to member outcomes, which don’t need an enormous effort, which have broad support (in industry and parliament) and which play well to the public. So, what might they be? My list includes four items:
- Final regime for defined benefit (DB) consolidators. Consolidation could be a game-changer, but only if the arrangements are right. Time is running out for many schemes and members
- Collective defined contribution (CDC) for Master Trusts. The Pension Scheme Bill opens the door, but regulations are needed to make this come alive. As an alternative to defined contribution (DC), it could be of huge benefit to savers
- Auto-enrolment (AE) review. AE has been an unequivocal success, but 8% is not enough and the practicalities are a nightmare. An upward nudge and simplification is what is needed next
- Dashboard-enabling regulations. The dashboard is important and, if carrots don’t work, need to be used.
Of course, I have a longer list and each of you will have your own favourites. But if we all ask for different things the risk is that we get none. Whatever the final shortlist, beyond that I suspect we will be faced with a ‘make do and mend’ approach, where the industry lives within its means and existing legislation.
Of course, that also comes with a positive. If there’s one thing the pensions industry loves to complain about it’s dealing with very long-term savings within a legislative environment that is constantly shifting. If we get that stability, at least for a few years, then perhaps that’s a silver lining.
This article was featured in Pensions Aspects magazine November/December edition.
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