The new Pensions Minister
May 29, 2015
We now have a new Pensions Minister. The appointment of Ros Altmann marks a step change in how government regards our industry.
Our new minister has already outlined her priorities.
She has said that getting the new DC regime of flexibility and choice sorted and in place ranks highly in her priorities. There is a real risk that the rushed nature of this new and exciting law will result in some teething problems. The new minister must get on top of what needs to be done to minimise any of these potential hiccups.
Continuing the process of getting millions of people into workplace pensions through auto-enrolment has also figured high on her stated list of priorities. She has said that contribution rates into these schemes are too low. Will we see a further increase in the statutory minimum beyond those already planned? Our preference is for any increase to be voluntary, i.e. we want employers and employees to pay more into their pension scheme because they want to, not because they are compelled to. The new flexibilities, combined with the new limits on charges, will make pension schemes more attractive and should be given a chance to work before any more compulsory changes are made.
The minister has highlighted the huge changes being made to the state pension scheme next year as it moves to a simpler, flat rate scheme. Getting these changes through and understood is a big job. However, we do think an opportunity to simplify the new regime further is being missed. Continuing uncertainty for employers and employees is now threatened as five-yearly reviews of the State Pension Age become enshrined in law. But these changes are hardly consistent with other changes being introduced. Dr Altmann has championed the new DC regime and has said "we must trust people with their own money". Let's do the same with the new state pension. Let's have the flexibility in that scheme that people expect in the 21st century. Our research has shown that one size does not fit all and a flexible State Pension Window is preferable to a single State Pension Age. Why not listen to what people want and trust them with their own money?
We need to make sure that the changes we make to our pensions system properly keep up with the huge changes we are now seeing in how we work and how we live. And we need to recognise the important role that the state pension plays for lower paid people. Freedom and choice in workplace pension schemes sounds great, but many will find that it is just an illusion if the state scheme is not equally flexible. What is the point of so-called pensions freedom if you don't really have the choice you want or need? It's a bit like those all-inclusive holidays where you have only two restaurants to choose from and can't have the really decent cocktails. It doesn't really feel like the choice you thought you were going to get.