Guest column: Reinvigorating pensions
The zeal that Steve Webb, our longest standing pensions minister, is bringing to the job is to be commended. With the publication of 'Reinvigorating Workplace Pensions' he has shown his commitment to meeting the challenge of getting people to save for a decent retirement. But, as we all know, reinvigorating pension savings in the UK is both complex and emotive.
Earlier last year, we set some delegates at our pension conferences what we referred to as 'The Steve Webb Challenge', asking them what they thought would really make a difference to the retirement landscape in this country.
Broadly speaking, there were four areas on which delegates focused their attention – a desire to extend tax reliefs, support for the potential of defined ambition, resistance to Solvency II and scepticism for the bonfire of the regulations. Overall, they expressed widespread support for the approach, and some of the ideas, now outlined by Steve Webb and the Department of Work and Pensions. However, it was perhaps no surprise that our conference delegates expressed concerns that – whatever the minister's aims - a lack of joined-up thinking and action could undermine future initiatives.
Two-thirds of those surveyed said a firm “no to Solvency II requirements” or any strengthening of existing funding standards. In contrast, there was support for relaxing the funding regime under current circumstances. In addition, an overwhelming majority called for an increase in the level of tax reliefs available to companies sponsoring pensions and to individuals. The merits of tax relief for pensions remain a critical factor in the debate.
One key area discussed in 'Reinvigorating Workplace Pensions’, was the aim to bridge the divide between defined benefit (DB) and defined contribution pensions by introducing defined ambition schemes. These too were greeted with cautious enthusiasm. Whatever the structure, almost two-thirds of our conference delegates recognised that state provision alone would be insufficient and that individuals should be pushed, not nudged into saving for their own retirement.
However, almost half the delegates felt reluctant to conduct a bonfire of the regulations, saying that this would only complicate matters further. There was also clear support still for the aims of DB but its practicality - given the burden attached to it - was seen as ever-diminishing.
The responses we received varied from the calmly thought-through to the emotional – reflecting both the importance of the subject and the depth of feeling. Steve Webb has demonstrated that he is in tune with the industry thinking and we all know that he has an unenviable but vital task. Even so, this is a unique opportunity for the industry to work with government, both to reinvigorate a savings culture in the UK and to re-shape the future of the industry.
Matthew Arends is principal consultant, retirement practice, Aon Hewitt