Enough! Let’s go make better pension policy!


In a recent DWP Select Committee, Frank Field pointed out that this parliament has so far seen little legislation proposed and enacted.

It is true.  Field urged Altmann to get on with it and now is the time to start making not more but better policy.

The legislative agenda is not cluttered, there is space for a good pensions bill and this blog is about what I want to be in it!

This is the story so far

This has been a frustrating year for our Pension Minister.

What Ros Altmann has done so far has been limited to reducing the scope of legislative change. She has put on hold the “pot follows member” and “defined ambition” projects.

The pot follows member project has morphed into the pensions dashboard which is due to be delivered by 2019 – instead of actual we will have virtual aggregation. No attempts have been made to create a collective decumulation product that could work as a default way for everyday people to spend their retirement savings (though this will be increasingly needed as more of us retire with meaningful pensions to free.

I hope I am abusing no trust by stating that I am a big fan of Ros Altmann and know that she wants to introduce better policy. Let us hope, once the current chaos dies down, she will be allowed to do so.

My understanding is that the DWP can set a Pension Bill before parliament this autumn (typically in October) and that it can become enacted this time next year (April 2017).

The time for the pensions industry to lobby for constructive change is now. This is what I and like-minded people to me are doing.

I will confine my comments to matters impacting on auto-enrolment as this is a primary focus for both the Pensions Regulator and for the DWP, I am aware that there are matters surrounding the introduction of the new State Pension and the ending of contracting-out which are equally deserving of attention. The matters I have pressed for help on surrounding decumulation are strategic and with so much tactical work to do, I won’t return to them again. Similarly the intellectual work Frank Field is carrying out on intergenerational fairness; this can rumble on through his good offices.


For larger employers auto-(re) enrolment is working.

There is a strong argument that we need no change and that we should make the best of what we have. The Pensions Regulator issues regular monthly bulletins outlining the tweaks to communication to make the employer’s journey to their declarations of compliance smoother.  The bulk of these updates is about reducing the friction that comes from the unintended consequences of the primary legislation, much of which was created for employers with a different set of problems and rather more internal or advisory capacity than those staging today.

For these larger employers, re-enrolment appears to have been relatively simple. I have heart it said many times that the capacity to postpone the re-enrolment date would be helpful and I hope that the DWP are looking at this issue .

For smaller employers, the challenge of the journey to compliance are much simpler, the Pensions Regulator has refined the 12 steps to 5 , improved the templates for communication, promoted a common data standard for data integration and invested a huge amount of time attending meetings of employers and intermediaries to ensure those yet to stage know what to do. They have also waived their stick effectively, fines have been issued, commensurate to non-compliance (IMO) and enforcement seems to be working well. Much of the problem with non-compliance – especially around capacity – has yet to materialise and this is because the Regulator has been doing a good job, with the support of the DWP.

But smaller employers need more help on pensions

Where there are problems, and the Friends of Auto-Enrolment is a good lightening gauge on this – has been with the choosing and implementation of the right pension for the employer’s needs.

I don’t think that the DWP have got this matter right in their head and wrote about this on Friday . The problem is one of ownership of the decision, one of agency and accountability.

This is where we need immediate and urgent clarification in the primary legislation on auto-enrolment to make it clear who is responsible for what. I am not laying down the law, but Ros Altmann can and should!

My view is simple and is that of current rules. It is the employer that chooses a pension, not the adviser and not Government. Advisers and Government can smooth the employer’s passage towards certain outcomes and make it harder for employers to make bad decisions but they cannot take the decision for employers.


Current policy is well-meaning but inadequate

I am pleased that the lines of communication on this with the DWP are open and that they are in listening mode. The current policy of promoting Master Trust Assurance (MTA) as a kite mark inadequate, as would be promoting the proper establishment of an IGC as proof that a group personal pension provider was fit for purpose.

Contributions can be messed up by Master Trusts with MTA and Master Trusts can go bust without the adequate capital to pay their wind-up bills. Insurers can use their IGCs as an extension of their marketing departments rendering their governance as effective as a chocolate tea-pot.


There’s a  need for more input from the market

By far the most effective determinator in a market economy is the market. In the case of auto-enrolment , there are two groups of market practitioners who the DWP can and should listen to.

The first are those in payroll who  spend their days (and sometimes nights) ensuring that data and contributions flow to and from payroll to pension providers, these people are key to the debate.

The second group of practitioners are those who measure the performance , sustainablility and member-centricity of the pensions – what we can collectively call “DC outcomes”. This second group is incipient, measurement of workplace pension performance and member-centricity is a nascent science and there aren’t many doing it.


Promoting a way for us to talk about what makes for good

The DWP needs to understand what good looks like and get its metrics and its performance analytics from the market. We urgently need to establish a way of cross referencing the nominal and risk-adjusted performance of the leading work-place pensions so that the public can see not just how their pension is doing but how it is doing against others.

We also need a consistent message on what intermediaries can say to employers. This separate issue can be informed by the new definition of workplace advice/guidance/education being forged out of the FAMR and from the repositioning of TPAS and other NGOs in the Government’s proposed Pension Guidance service.


And we need for a proper evaluation framework for workplace pensions

There is a need for urgent primary legislation to create the framework of performance evaluation of qualifying workplace pension schemes that measures not the amount they have spent getting kite marks, but the value they have delivered to employers and to the people  who have enrolled into them and are now relying on them to perform.

Without this service, that could be established in the private sector (with Government funding) or as part of the Pensions Regulator’s function, we will continue to be blind to the true value of our workplace pensions.

The value of this service would be particular for the IGCs and Chairs of Trust Boards who are currently struggling to make meaningful comments on whether their workplace pensions are delivering value for money.

Such a service could also be tasked with properly investigating the true costs and charges within the investment default offered by each workplace and of making these numbers public. I am coming to the conclusion that while the forensic skills needed to do this work rest in the private sector, these need to be employed by a public body for them to be consistently applied. The value of Government is that it is truly independent.


Is the window for policy reform opening?

The current chaos that has led to the loss of a respected Minister of State and the loss of credibility of our Prime Minister and Chancellor of the Exchequer, is the result of a failure of two departments, the Treasury and the DWP to work together.

If the Government can learn anything from this mess, it is that we need the Chancellor and the Minister of State for Social Security to work as one.Stephen Crabb’s relationship with Osborne has to be better than that of his predecessor’s . Judging by Ros Altmann’s statement about her relationship with  Duncan-Smith, Crabbe’s relationship with his key minister can also only be an improvement!

It may be that we look back at the EU referendum debate, not just as de-railing meaningful pension reform in the Treasury (witness the u-turn on tax-relief) but the inability of Ros Altmann to make a meaningful contribution to the reform of the pension benefit system. Here is the BBC report of the statement she has made

As far as I could tell, he (IDS) appeared to spend much of the last few months plotting over Europe and against the leadership of the party and it seemed to me he had been planning to find a reason to resign for a long time.”

Ros Altmann also said she had found him “exceptionally difficult” to work for and said he had “often been obstructive to my efforts to resolve important pension policy issues”.

If Ros Altmann is right, and I have no reason to doubt her, the resignation of Ian Duncan Smith, whatever it means for other areas of social security , will be a good thing for pensions.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Enough! Let’s go make better pension policy!

  1. Randy Bauslaugh says:

    Shouldn’t pension reform be about providing pension schemes, not savings schemes? Independent research indicates that defined benefit schemes are, hands down, the most cost effective and efficient means of providing pensions. Obviously, the inflexibility of the employer guarantee under defined benefit schemes poses existential risks to employers. But what about reform? I suppose if you can’t have change that supports more flexible defined benefit schemes, such as defined ambition, then sadly, you have to make the best of savings schemes — even to the point of calling them pension schemes.

  2. henry tapper says:

    I am in your camp Randy. We have to make the best of what we’ve got.

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