When we entered 2016 we were fully expecting a major reform of pension tax relief, auto-enrolment to fall over and austerity.

We have ended the year with our pension system much as it was but with the economy in which it works undergoing a paradigm shift.

Almost two years after Scotland voted to remain in the UK, the UK – with the notable exception of Scotland – voted to leave the EU. Ironically, it was to avoid just this, that Cameron and Osborne ditched the much heralded tax reforms to pensions – that were due to be announced in this year’s budget. Who says pensions aren’t a political football.

So this was a year when Pensions stepped back out of the limelight. We did have some new legislation set to make master trusts fit for our workplace pensions, we have had minor reforms to our tax and advisory systems, but this has been a year of consolidation for pension reform.

Perhaps the biggest regulatory event of the year – certainly for institutional pensions – was the FCA’s interim study of Asset Management. This may prove as disruptive as the RDR and the FAMR have been to the retail pension markets. Certainly the hegemony of active managers and investment consultants looks to be under threat.

Defined benefit schemes have had a difficult year. Occupational schemes continue to close for further accrual and deficits, measured by the PPF7800 have grown as QE continues to drive down gilts yields (increasing liabilities). Unfortunately, many schemes have now so invested in bonds, they have been unable to benefit by the post Brexit rebound in equity markets.

Increasingly, actuaries have been rebelling against received wisdom that pensions should be invested in gilts (as matching assets) and re-asserting the right of schemes to value themselves using the long-term return assumptions of the scheme. This has led to an alternative view of DB pension funding, most notably articulated by the First Actuarial Best Estimates Index (FABI). Cynics have dubbed it the La- La index.

But perhaps the event of the year for pensions, was the launch of a new integrated state pension. While there have been some losers in the new retirement calendar (most notably the WASPI women) the changes both to pension entitlements and to the presentation of the state pension have been deemed a success.

Non-event of the year, as previously mentioned, has been the failure of auto-enrolment to crunch for lack of capacity. Although compliance breaches have increased, there is no sense of the panic suggested in previous years. Advances in payroll technology and the consolidation of workplace pension providers around high-tec solutions – in particular from NEST, have meant auto-enrolment has stayed on track.

Looking back on 2016 then, it was a year where for all the noise, not a lot really happened in pensions. What did happen was generally good and despite BHS, pension scamming and worries over the future viability of the pension triple lock, 2016 was a year when, at least in pensions terms – we all did very well.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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