Pensions minister Guy Opperman has been refreshingly pragmatic in his first 12 months in the job, writes Andy Tarrant from The People’s Pension, but he still faces major challenges including self-employed saving, the dashboard rollout and default decumulation.
Over the past 12 months, he has engaged with stakeholders across the industry and has shown a refreshing commitment to policy transcending party politics.
Calls from employers for simplicity were listened to, while proposals to include younger savers under auto-enrolment, and start pension contributions from the first pound, were announced.
It would serve members of all schemes well if a wider set of providers, not limited to mastertrusts, had to consider whether they were viable and equipped to deliver best value for money for members
However, there is room for the government to do more to deliver on the agenda set out by the 2017 review.
Still no self-employed solution
We cannot ignore that despite self-employed workers now making up 15 per cent of the British workforce, they still are not covered by auto-enrolment.
While Opperman’s decision to examine whether technological solutions could promote engagement by the self-employed was a reasonable first step, a mass solution will also require encouraging demand through national insurance contributions and facilitating low-cost supply through the tax self-assessment process.
Opperman has been vocal in his support of the pensions dashboard, a tool with the potential to revolutionise the way in which people engage with their pensions.
The current pensions system means that for many savers, simply finding out how much they have saved for retirement involves too many hurdles, and people are putting off planning for the end of their career until the last minute.
Dashboard serves a vital purpose
The average person builds up 11 different pension pots over the course of their lifetime, with a very real risk that many of these pots end up lost or forgotten. We have a responsibility to do everything we can to make it is as easy as possible for people to plan ahead.
A single, public-good dashboard, as called for by the Work and Pensions Committee, will be a key tool for facilitating this.
By streamlining savings on a single, user-friendly interface, the dashboard could be the missing link that many savers need to connect the dots between savings and outcomes.
More broadly, having a dashboard underpinned by legislation and administered by an organisation in close collaboration with government will help to build consumer trust in the pensions system.
If we focus on the consumer, introduce strong regulation and ensure all providers play their part, the dashboard will be a success, and help millions of people plan for a better retirement.
Consolidation will benefit savers
Over the past year, the government has also created conditions in which mastertrusts must consider whether they have the scale to remain viable.
We expect the rigorous nature of the new mastertrust authorisation to lead to market consolidation, which would leave a smaller number of larger, financially robust mastertrusts with strong governance structures.
It would serve members of all schemes well if a wider set of providers, not limited to mastertrusts, had to consider whether they were viable and equipped to deliver best value for money for members.
Greater consolidation and scale will mean schemes with lower costs and a greater ability to offer improved services to members.
Get ahead of the curve on decumulation
Opperman may come to be best known for being the politician under whose watch the auto-enrolment revolution was extended into decumulation, even if the market is already developing ahead of any government intervention.
The pensions dashboard will serve members who can engage and is likely to increase the number that are able to do so. However, auto-enrolment is designed to ensure that everyone, not just the pension savvy, obtains a workplace pension.
Members can be faced with what they see as a daunting and often complex array of options at retirement and many respond in ways that risk them running out of private income in retirement.
Moving forward there is a clear need for a guided pathway in retirement for savers, and we hope the minister seizes the opportunity teed up by the WPC to set course for a system that delivers for all pension savers.
Andy Tarrant is head of policy and government relations at The People’s Pension.
