In his first speech as Secretary of State for Work and Pensions, David Gauke called for consensus and collaboration to ensure a positive future for pensions, but admitted that it will take time to address some of the more challenging policy issues, from pensions tax relief to extending auto-enrolment to the self-employed.
Formerly chief secretary to the Treasury, David Gauke took over the role from Damian Green following a cabinet reshuffle after the June 8 2017 general election.
There’ll continue to be a bit of a debate on pensions tax relief, but at the moment I don’t see that there is a particular consensus emerging
David Gauke, secretary of state for work and pensions
Addressing pension professionals at an Association of British Insurers conference, Gauke put emphasis on securing long-term objectives. He highlighted the repercussions of increased life expectancy on future generations, while welcoming the work of John Cridland and the Government Actuary's Department in looking at the future state pension age.
“It represents exactly the sort of long-term approach I want to cultivate within my department and across wider government,” he said.
Success stories highlighted
Gauke mainly drew attention to the more successful aspects of pensions policy, arguing that "we’ve already had some notable successes where the government have collaborated to achieve positive outcomes for both consumers and pension providers”.
He cited this year's launch of the pensions dashboard prototype as an example, despite industry scepticism over data security, and how long it may take before the service is available to the general public.
The introduction of freedom and choice “is another example of government and industry successfully working together”, said Gauke. He did not give any indications as to how government intends to address the apparently widespread confusion it has created. Prudential research revealed that more than two out of three people over the age of 55 are still confused about the new freedom rules.
Gauke also praised “the major success story that is auto-enrolment”, emphasising how this development has “improved millions of workers’ future prosperity”, arguing that “the bedrock for this success has been the sustained consensus between industry, government and other stakeholders".
Gauke admitted that “we still have a lot to achieve”, including the aim to extend auto-enrolment to the self-employed, who are currently excluded. In 2015, a report for Citizens Advice discovered that only 17 per cent of self-employed people were contributing to a pension.
A Pensions Policy Institute report found that prior to auto-enrolment, 25-35 per cent of 22-29-year-olds working in the private sector were active members of a pension scheme. As a result of auto-enrolment, this rose to 54 per cent by 2014. However, participation is still higher among those of older ages with 64-66 per cent of people aged 30 to state pension age contributing to a pension in 2014.
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Gauke said that “it is apparent that we must do more to encourage new savers, many of whom are young, to engage with their pension provider” and “both government and industry must look closely at the ways in which we can support this new type of saver".
No imminent changes to pension tax relief
While Gauke repeatedly stressed the need for continuity and consensus, Jamie Jenkins, head of pensions strategy at Standard Life, pointed out that there is still a distinct lack of consensus regarding pensions tax relief.
Gauke said that “there’ll continue to be a bit of a debate on this issue, but at the moment I don’t see that there is a particular consensus emerging”. He added: “I wouldn’t expect to see any fundamental changes in the near future.”
Tom McPhail, head of policy at platform provider Hargreaves Lansdown, noted that Gauke "was focusing on some of the safer aspects of policy” and hinted at the difficulties this government will face in implementing more challenging interventions, such as pensions taxation.
He said that Gauke seemed to be “managing the industry’s expectations”. McPhail added there is “a clear message there for the industry that it’s up to us to do some of the intellectual heavy-lifting… to try and create a consensus” and “to take the time to work out what we can do and present the solutions to the government”.
