At 11am on Tuesday 18th April I shook hands with Richard Harrington, our Pensions Minister and began a meeting that discussed how small businesses could in future measure how effectively their workplace pensions were working.
The meeting was interrupted by the Minister’s phone vibrating with calls from colleagues. To his credit the Minister put pensions before politics and went on to meet John Cridland, to discuss his work on the state pension age.
We now know that the planned announcement from the DWP on Cridland’ s work will be delayed to the next parliament, that the Finance Bill has been mutilated to get assent before parliament dissolves but the Pensions Bill has received Royal Assent and is enacted.
Whether the Pensions Minister is still the Pensions Minister after June 8th depends on his being returned by his Watford Constituency and his not taking the job at Biz he is widely rumoured to have been offered.
Harrington became the first parliamentary under-secretary for pensions in July last year, previously the role carried a senior ministership. The demotion of the role was no slur on Harrington but a reflection of the reduced influence the DWP has in pension policy. It is likely that Ros Altmann will have been the last full Minister with the pensions brief and Steve Webb the last MP to hold the senior role.
It is a useful reminder to those who work on the auto-enrolment project that the critical decisions on pension taxation, the indexation of the state pension and the schedule for phasing auto-enrolment contributions are subject to Treasury approval.
Increasingly, the business of pensions regulation and governance is transferring from Brighton (the Pensions Regulator) to Canary Wharf (the Financial Conduct Authority).
My discussion with Harrington focussed on FCA initiatives (independent governance via IGCS and the Pensions Dashboards). The FCA has also assumed control of the costs and charges initiative which is crucial to the value for money scoring which it’s intended employers and members can use to benchmark their workplace pension.
Increasingly, the Pensions Regulator role is limited to managing compliance of auto-enrolment and protecting the pension protection fund from failing defined benefit schemes.
Harrington asked me if I was in favour of merging tPR and FCA, I replied that the FCA would not merge but acquire- despite disapproving looks from civil servants in the room, the Minister smiled knowingly.
So what can we learn from the past few weeks of political upheaval. Well I’m learning not to expect longevity of tenure among ministers, Webb, Altmann and Harrington may well be joined by a fourth evangelist in three years!
I’m also learning that for solutions to our issues on workplace pensions, we should be spending more time with the Treasury and its regulator, the FCA.
Though the DWP has currently a number of open consultations (including its triennial review of auto-enrolment), the critical decisions for employers and their payrolls will be taken by the Holy Trinity of the Treasury- HMRC and the FCA.
This is the first edition of Reward Strategy with its new focus on workplace pensions. I’m pleased to see the magazine develop this way as pensions are deferred pay and integral not just to payroll but to strategic reward.
This edition will be the last published under the current Government and you’ll be reading as the election campaign climaxes.
How and when we are “rewarded for our work” is proving a critical issue in this election. The result will have implications not just for the employed and the pensioner but for those working in the gig-economy and the professionally self-employed.
But while we talk of workplace pensions in the same breath as defined benefit schemes and the state pension, they are increasingly seen within Government as feeder arrangements to the retirement freedoms granted by the Treasury in the 2015 Finance Act. Workplace pensions are only pensions in name and in the tax treatment on contributions and investment gains.
Extreme libertarians argue that we might as easily auto-enrol into workplace ISAs and break any formal link with pensions.
Meanwhile, a fierce battle is being fought between the Communication Workers Union and the Royal Mail. The CWU argue that their members are promised a pension, the Royal Mail want to provide a cash sum.
This ongoing argument about how we get paid in retirement is one that those of us employed in payroll should be a part of. For me the reward from work is pay, part of which is deferred into a pension. The link between work and pensions is primary.
While I can see an argument for workplace pensions being regulated by the FCA, I fear the loss of influence from the DWP on pensions policy. Defined benefits pensions – as distinct from pension freedoms, are deferred pay; workplace pensions are – like the DWP – suffering an identity crisis.
We need to be clearer what we mean by workplace pensions, who has the governmental remit for them and where accountability for outcomes properly lies. Let’s hope that whoever sits in Richard Harrington’s current office, after June 8th, can sort this out!
This blog was first published in payroll world