Measures in the proposed Pensions Bill to advance the pensions dashboard, strengthen the Regulator and enable new forms of pension provision are welcome, but key measures have been left out because of splits in government, according to Steve Webb, Director of Policy at Royal London.
DWP has been looking to advance policy in two important areas but their absence from the Pensions Bill shows that the Department has been blocked by the Treasury.
The first is the expansion of automatic enrolment, where DWP undertook a year-long review which concluded nearly two years ago. This recommended that automatic enrolment should start at age 18 (rather than 22) and that mandatory contributions should apply to all earnings (rather than only applying to earnings above a ‘qualifying earnings’ floor). These recommendations have been widely welcomed and accepted by DWP but Treasury opposition to the resultant rise in the cost of pension tax relief means that they are on hold.
The second key area is regulation of so-called ‘DB superfunds’ which would allow the consolidation of smaller final salary type pension schemes into larger vehicles. DWP has consulted on regulation but the Treasury is concerned that these schemes might compete unfairly with insurers who sell bulk annuities to pension funds. With no new statutory framework, the Pensions Regulator will now have to improvise a regulatory regime within its existing powers.
Commenting, Steve Webb said:
‘This Bill is notable more for the things that have been left out than for what it contains. The absence of vital measures on automatic enrolment and on regulating new ‘superfunds’ is a sign of a battle inside government where the Treasury once again has defeated the DWP. As a result, the vital expansion of automatic enrolment is now on hold, and the regulation of pension superfunds has been left in regulatory limbo. It is one of the biggest failings of UK pension policy that the Department with lead responsibility for pensions can be thwarted in bringing forward sensible reforms by an over-mighty Treasury which has no vision for pensions’.
About Royal London
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £130 billion, 8.8 million policies in force and 4,046 employees. Figures quoted are as at June 2019.
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