Queen's Speech omits pensions as focus is firmly on Brexit
After the intensity and frequency of debate and consultation on pension issues, the industry is left in limbo by the government’s legislative programme.
The Queen’s Speech – delayed after the June 8 snap election did not produce a clear majority for any party – was notable more for what it did not say than what it contained, several industry commentators observed.
The speech and briefing documents make no mention of the state pension age and the recent Cridland review, defined benefit pensions, or cold-calling. This is despite documents stating that “the ageing population presents one of our nation’s most profound challenges”, as the number of people aged 75 and over is expected to increase by 70 per cent between 2015 and 2035.
There will be a finance bill and a national insurance bill, they could put things in there
While pensions were largely omitted, social care will be consulted on later in the year. The consultation comes after Prime Minister Theresa May shocked the electorate in May with a proposal to scrap the existing cap of £75,000 on costs to individuals, to instead introduce a £100,000 floor. She was forced to perform a U-turn by mentioning a cap, at a level yet to be defined through the consultation.
The triple lock did not make it into the speech either, having been a topic of intense debate during the election campaign. Some commentators pointed out that it was not in the speech because a change would not require legislation.
The only instances of the word ‘pensions’ in the speech and briefing documents relate to a bill to create a previously announced financial guidance body that will replace The Pensions Advisory Service, the Money Advice Service and Pension Wise.
No sign of state pension age or DB changes
“What’s striking is what’s missing,” said Steve Webb, former pensions minister, now director of policy at provider Royal London.
Webb cited the state pension age as an obvious example. He highlighted that government has a legal duty to respond to the Cridland review of the state pension age, having already fallen foul of the deadline of May 7 2017.
Therefore, “you’d expect it to be in the Queen’s Speech”, he said.
The fact that it is not, he argued, means changes to the current timetable for state pension age rises, which the review had said should be brought forward, are unlikely.
“If they were going to change the timetable they needed law to do it. There is no sign of the law.”
Similarly, the DB green paper, which pulled together many of the concerns around DB pensions, has also not translated into a plan for legislation in this parliament.
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Webb said the “glass half full way of looking at it” would be that this results in stability, but warned: “There are things that need addressing.”
This includes greater powers for the Pensions Regulator to intervene in corporate activity. With the current regime unchanged, a further BHS-type case was not unthinkable, and members are being put at risk, he noted.
Laws might be part of other bills
Senior consultant at Barnett Waddingham Malcolm McLean agreed that not much on pensions had made it into the speech.
“It’s quite clear they’ve dropped a number of things,” he said.
However, McLean cautioned that there could still be new laws that were not expressly mentioned.
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“One of the questions I always ask myself is, 'Is it comprehensive?'. There will be a finance bill and a national insurance bill, they could put things in there,” he pointed out.
“One thing that’s not clear is what will happen to the ban on cold calling. There will have to be an act of parliament,” said McLean, but added: “I don’t think all of these things are necessarily not going to happen – they probably will.”
Digital strategy and education push lauded
Tom McPhail, head of policy at platform provider Hargreaves Lansdown, highlighted areas that could have an indirect effect on pensions, such as the announced digital charter, and a focus on improving education.
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A wide-ranging government green paper is exploring a number of possible changes to improve the sustainability of defined benefit schemes, but although experts welcomed the variety of issues discussed, some noted a lack of urgency.
He said the first has the potential to speed up the pensions dashboard if digital identities can be used for customers of financial services, while the latter could root financial education more firmly in the school curriculum.
The government’s lack of focus on later-life provision is due both to the all-consuming process of exiting the EU and to the slim majority the government has, said Webb. These factors reduce parliamentary capacity and government appetite for tackling contentious matters.
McLean also blamed Brexit but pointed to another potential reason: “Realistically, parliament might not survive as long as five years anyway.”