Save content
Have you found this content useful? Use the button above to save it to your profile.
workie the 12 foot pensions monster...
The Pensions Regulator

Pensions should matter

by
20th Jul 2016
Save content
Have you found this content useful? Use the button above to save it to your profile.

Kate Upcraft is outraged at the downgrading of pensions as an issue within government.

New brooms

Over the last week I’ve been in turn surprised and impressed by the appointments of new ministers by the new Prime Minister, but now I feel deeply disappointed.

Over the weekend (15-17 July) Pension Minster Ros Altmann, who had been made a Baroness and parachuted into the job after the much-admired Steve Webb lost his seat at the General Election in 2015, resigned and fired off a resignation letter of past regrets and future hopes. What then followed was a farce. First there was an ‘announcement’ that Penny Mordaunt had been appointed as the new Pension Minister, coming to the brief with no pensions background.

On Monday 18 July things took a strange twist as reports began to emerge that Mordaunt was not the Pensions Minister, in fact there was no longer a Pensions Minister at all. Richard Harrington was declared to be the Parliamentary Under-Secretary for Pensions, the lowest ministerial tier below a fully fledged minister. He too has no pensions background, having previously been at the Home Office in charge of the re-settlement of Syrian refugees. 

So why has the pension brief been downgraded within the new government just at the time when we are all being told ‘don’t ignore Workie?’(Workie is the furry monster mascot tasked with promoting auto-enrolment to businesses)

Tasks ahead

Auto-enrolment is not yet a success. We are not even at the end of the beginning, as we won't have finished the first tranche of staging until the latter part of 2017. Following on closely behind will be the uphill struggle to fund employer contributions of 3%, and to encourage employees to stick with saving into a workplace pension as their contributions reach 5% and beyond.

We also have the small matter of a Pensions Bill that needs piloting through Parliament to shore up master-trusts, deal with the pension discrimination of massively unfair tax relief, and punitive exit charges if you want to get hold of your own money.

Links cut

Does this downgrade of pensions herald a seismic shift of pension policy towards the Treasury, away from DWP? This is possible now that the state pension has no earnings link.

If that is the case, I hope that those in charge will continue to take advice from people outside government who have helped workplace pensions become firmly part of remuneration strategy. We need to ensure employers and government really don’t ignore Workie, and recognise the crucial role employers and agents have in the future financial well-being of millions of workers.

If the government doesn’t think pensions are important why should the army of micro-employers facing this new obligation? 

Tags:

Replies (2)

Please login or register to join the discussion.

the sea otter
By memyself-eye
21st Jul 2016 15:23

who's kidding who? Workplace pensions will never accrue enough for most people to rely on in retirement. They are costly to set up, time consuming to manage and another rising burden on small businesses. I'm looking at a printout now for one of our clients with 26 staff. The weekly pension sum, both employer and employee is, err..... £24.15.

Thanks (3)
avatar
By Knight Rider
02nd Aug 2016 18:07

I don't think we should read into this that the Government doesn't think pensions are important. We have a new government because the last one failed to prepare for the possibility of losing the referendum not because of any downgrading of the importance of pensions.
People don't trust their employers, the Government or the financial services industry on pensions. Ever since Robert Maxwell splashed into the sea successive governments have heaped legislation onto employers schemes resulting in their closure and switch of investment risk onto employees. The removal of the dividend tax credit (which George Osborne promised to restore) further added to employers costs. Responsible savers saw their pensions lost after years of employment and the government did nothing until MPs mailbags filled up so much they had to invent the FAS/PPF.
Fortunately the last government's scrapping of compulsory annuities and the raising of the state pension have gone a little way to restoring confidence in pensions. Unfortunately the appalling communication to those most affected by the changes(such as women approaching 60 who find they have to wait another 7 years for a pension) and the much trumpeted 90% of the PPF (which is much less when indexation is considered) will only serve to undermine confidence in the government on pensions.
Low investment returns(whether real or perceived) and low rates of interest are turning a generation away from saving. Compulsion (aka auto enrolment) is only a response by government to its own regulatory failures and the failure of pension companies to meet their projections.
What is needed is more long term vision, transparency and simplicity.How about a basic state pension of £500 per year for every year of employment with an opportunity to make top up contributions, some flexibility over retirement age, all paid for by ending higher rate tax relief on private schemes?

Thanks (0)