Pensions Expert editor Nick Reeve looks forward (again) to a momentous week for the UK pensions sector.
In what is perhaps the worst-kept secret in industry right now, we fully expect the Pensions Adequacy Review to be launched on Monday.
(We’re certain this time. I know we all thought it would happen when the chancellor spoke at Mansion House earlier this week, but now we’re really sure.)
Work and pensions secretary Liz Kendall and pensions minister Torsten Bell will set out the scope of the review before promptly disappearing off on holiday, as parliament goes to recess on Tuesday. That will give us all a couple of months to digest the news and get ready to tell the government that they’ve got it all wrong when MPs return to work in September.
As I touched on last week, there are question marks about what the government can actually do. Raising contributions will be difficult to sell to employers or employees, especially as inflation remains stubbornly high – although other changes to widen the scope of auto-enrolment would be much easier to enact.
Sir Steve Webb, the former pensions minister, this week outlined three key “tests” for the review to pass to ensure it does not get “nobbled” (his word) by the Treasury.
Sir Steve knows very well that, while the DWP ‘owns’ pension policy to an extent, the Treasury holds more sway, given the tax and spending implications that major pension changes can have. Whether the current pensions minister’s dual reporting line is mitigating this is debatable.
This makes his tests all the more interesting. First, will the review include proposals that will cost the government money? (Don’t hold your breath, I say.)
Second, will it incorporate the state pension? It probably should, but this line from the final report of the Pensions Investment Review gives cause for concern in that regard: “The success of automatic enrolment and a simplified, fairer, and more accessible new state pension means that the foundations of the pensions system have been strengthened.” Does that mean the government thinks the state pension is ‘done’?
Finally, Sir Steve asks whether the adequacy review will look at issues beyond pensions. Concepts such as sidecar savings could fit in here, as well as wider-reaching issues such as financial wellbeing and financial education – all things that could have major positive impact.
We should not downplay just how vital the Pensions Adequacy Review will be. People are not saving enough, and many don’t have the capacity to do so. The government has to be bold – the financial future of millions of people depends on it.
Nick Reeve is editor of Pensions Expert
