Disruption of auto-enrolment happened way before the recent referendum and is set to continue as one of the many unintended consequences of a leave vote.
The ambitious legislative reforms put in place by the coalition’s pension minister Steve Webb were pruned only months into the new administration when Ros Altmann called time on Defined Ambition and Pot Follows Member. It was claimed that these policies had fallen victim to austerity (the DWP simply didn’t have the lawyers to go round) but many pension commentators sensed the dead hand of the Treasury and their obsession with the ISA as its savings plan of choice.
These fears proved correct when after a year of consultation, the Treasury announced it was binning its plans to reform the taxation of pensions in this year’s budget. The excuse this time was “market volatility”, though who now remembers the stock market turbulence of the first quarter? In reality, the Treasury were battening down the hatches in readiness for the June referendum. Talk in Westminster was that nothing radical could risk our continued membership of the EU.
So the first 14 months of the new administration has seen a retreat from the Coalition’s radical reforms, the deferral of the tough choices on tax-relief and now the breakdown of normal Government following a plebiscite that went horribly wrong.
What little cheer pensions have had, has been around the introduction of the new state pension, the ending of contracting out and a movement to a new simple way to understand state retirement benefits. And of course the continuing successful roll-out of auto-enrolment which is now entering its fourth year.
But all in the auto-enrolment garden isn’t rose, indeed some of the roses are thought to be developing canker which is why the DWP has been allowed a small but significant Pensions Bill. Ros Altmann is using the Bill as a chance to introduce some much needed regulation around small master trusts, many of which are seen as unfit for the purpose of carrying worker’s retirement dreams through the next four or five decades.
The smooth passage of this Bill to enactment in April 2017 looks like being the next in what is coming a queue of pension policies that don’t quite make it to implementation.
Pension legislation is front-end loaded with difficulty for politicians. It is very rare for a policy to give a quick win (pension freedoms being the exception that proves the rule). Typically, legislative change caused grief today and delivers well after the politicians term of office has expired.
Small wonder then that we currently have neither a pension minister or a shadow pension minister in the house of commons! The difficult truth is that pensions are the Treasury’s political football and Her Majesty’s opposition has been through three pension ministers in little more than a year.
So despite the heroic efforts of the accountancy and payroll professions to help Workie out, the research and development teams from the private and public sectors have been thwarted in creating a long-term solution to the structural issues that beset workplace pensions.
We still have pot proliferation rather than pots following members
We still have no mass market alternative to annuities
We still have no solution to the nonsense of net pay and relief at source taxation systems
We still have a plethora of master trusts with no obvious means of survival.
So the next time you are called upon to help an employer set up a workplace pensions (whether yours or a client), it’s worth considering just what the outcome of the great AE experiment is likely to be.
I share with the Government an enormous optimism for auto-enrolment’s potential, but I am growing tired of seeing the retirement plans of generations to come being put at risk by short-termism in Westminster.
The coalition government of 2010-15 was a golden era for workplace pensions, it looks like this Government will be reverse alchemists, turning gold to lead.
We have exited Europe through a series of political blunders. If we are not careful we will find ourselves out of love with auto-enrolment for failures of a similarly political nature.