Torsten Bell addressed the pensions industry in a speech at Mansion House last week, setting out a revised roadmap for pensions reform to bring clarity to the various timelines for different changes and new rulebooks. Here are the main highlights from his address.
The task confronting us is clear – decent retirements for today’s private sector workers, levelling up the pensions they enjoy, closing the gap with yesterday’s private sector workers and today’s public sector employees.
There are reasons those gaps have grown – some reasons that will always be with us, most importantly the greater ability of the state to bear risk relative to individual employers.
But today’s gaps go far beyond the unavoidable and closing them is the task in hand.
We need to celebrate the progress of the 2010s in getting people saving, but be tough on ourselves about the role of the 2020s: complete the job to build not just savings pots but a pensions system. A system that delivers adequate pensions for savers and underpins the prosperity of the economy as a whole.
The stakes are high, and we must build this system in the face of change and of challenges, not least the reality that we are an ageing society and projections that on current trends those retiring in 2050 will have lower private pension incomes than those retiring today.
Labour ‘committed’ to pension reforms despite leadership uncertainty, says Bell
Ahead of the appointment of Andy Burnham as the UK’s new prime minister, Torsten Bell last month said the Labour Party remained strongly in favour of the reforms set out in the Pension Schemes Act despite the change of leadership. See the full article.
From development to implementation
Now the time has come to stop talking in parliament and act in the real world. The delivery phase is very much here.
There are days when the scale, complexity and interconnectedness of reforms dents my optimism. But those days are rare for two reasons.
First, the policy progress already made – not least rescuing workplace pension saving from its near extinction.
Second, and most importantly, because of a huge advantage we have in delivering this change: the increasingly shared sense across policy makers and industry of where we need to get to.
In complex ecosystems – and pensions is definitely one – a shared understanding of the destination is crucial. It is what means we can all pull in the same direction across thousands of individual decisions.
This is what this updated roadmap aims to do: spell out the phasing of reforms.
I know some will be impatient for swifter progress on specific issues. I encourage those people to speak to others, who raise with me the real challenges of how many things are to be done in quick succession.
In drawing up the roadmap, we have balanced the need for change with the reality that all institutions face capacity constraints in implementing change. That includes government.
“Our goal is to provide the certainty people have asked for, while taking a pragmatic approach, reflecting on valuable engagement right across the industry.”
Our goal is to provide the certainty people have asked for, while taking a pragmatic approach, reflecting on valuable engagement right across the industry. For example, we have updated delivery plans for the new Value for Money regime so that the first year of assessments does not come with regulatory consequences.
And I want to ensure the timeline for Guided Retirement works alongside legislation to enable retirement-only collective DC.
There is of course more to come. Our changing pensions landscape, not least the prospect of such significant pension schemes in future, requires us to strengthen trusteeship and governance.
This summer has also seen the Pensions Commission publish its interim report, setting out the problem statement for the next phase of reform: too many people are not saving enough for later life, and plenty are not saving at all, with virtually no pension saving being done by the wholly self-employed.
I look forward to receiving their final report early next year, and we will swiftly turn their recommendations into action.
The prize is worth the effort
This roadmap recognises both the imperative for change and the reality of what it takes to bring these reforms to life. It charts the course to a pensions system fit for the 21st century, with pension savers at its heart.
We all know there is much to be done, but holding us to the course laid out in this roadmap is something even more important: the scale of the prize for doing it.
Marrying the design of our pensions system to the desires of millions of today’s workers for a comfortable retirement. That is a marriage well worth celebrating, and I am very grateful for everything [being done] to make it happen.
