Ruth Bamforth from Walker Morris looks at some of the pensions policies we might see more of under a new government.
The UK has a hung parliament and it seems that the Conservatives are going to form a government in a pact with the Democratic Unionist Party. While it is unlikely that pensions issues will be at the top of the new government’s agenda, here is a guess at some things (drawn mainly from the Conservatives’ manifesto) we might expect to see.
TPR could get new moral hazard powers
The collapse of BHS led to much scrutiny by both parliament and the Pensions Regulator. In a rare example of cross-party consensus, there was a feeling that something more needed to be done in order to try to protect pensions from unscrupulous employers.
The conundrum for any government is how to balance the cost of state pensions in the face of increasing longevity
The Conservative manifesto promised:
new regulator powers to issue punitive fines where a pension scheme was left “wilfully” under-resourced;
to build on the clearance regime to give pension schemes and the regulator the right to scrutinise, clear with conditions or in extreme cases stop mergers, takeovers or large financial commitments that threaten scheme solvency;
to consider introducing a new criminal offence for company directors who “deliberately or recklessly put at risk the ability of a pension scheme to meet its obligations”, as well as new powers to disqualify company directors.
The challenge will be to turn these promises into a workable reality.
Government under pressure on state pension
The state pension has seen root and branch reform over recent years. State pension age will be equalised at age 65 for men and women in 2018 and then increased to age 66 by 2020. The single state pension was introduced from April 2016. The triple lock – the highest of the rise in average UK earnings, increase in inflation (consumer price index) and 2.5 per cent – was introduced in 2010 by the coalition government to ensure that the value of the state pension was not eroded by the gradual increase in the cost of living.
The UK has an ageing population. The conundrum for any government is how to balance the cost of state pensions in the face of increasing longevity (and not necessarily healthy longevity) while ensuring pensioners have adequate retirement provision.
Pensions slip down the agenda after election
If Theresa May’s Conservatives succeed in forming a lasting government, their immediate policy concerns regarding pensions are unlikely to change.
We can probably expect to see further increases in state pension age to ensure that “pension age reflects increases in life expectancy”. At the same time, the triple lock is likely to become the double lock of the higher of earnings and inflation from 2020 unless, of course, the DUP has other ideas.
What about the self-employed?
The new government is likely to remain committed to automatic enrolment. It remains to be seen whether or not it takes forward the Conservative manifesto suggestion that auto-enrolment will be rolled out to the self-employed.
Brexit means Brexit?
The election result has not changed the fact that Brexit continues to be a word without precise meaning. It means that the UK will leave the EU, but we have no idea where on the Brexit spectrum the UK will end up. Whatever the nature of Brexit in practice, it will continue to be business as usual for UK pension schemes. If the Great Repeal Bill goes ahead, all EU pensions and employment protection legislation will be written into UK law.
As this election has shown, crystal ball gazing is notoriously unpredictable, but it is unlikely the government will look to ride roughshod over EU pensions law requirements any time soon.
Ruth Bamforth is a director at law firm Walker Morris
