Tough choices for our Pension Minister

Guy opperman tweet

Despite the reshuffle, our Pension Minister, Guy Opperman is staying our Pension Minister.

As pension celebs go, Opperman has been – so far – decidedly B-list; there is only so much time a Pensions Minister gets to acquaint himself with his job and – as recent tenure has shown- that time can run out. The list of ex-pension ministers who never quite got round to doing anything is growing longer.

So far, the only firm commitment Opperman has given is to the Pensions Dashboard. He intends for it to be, not the series of data standards envisaged originally, but a utility run and managed by the DWP. This is, as I have said on this blog several times – a vanity project – destined to fail. It is also a blocker to the very real challenges that exist within pensions which are not glamorous , but are pressing.

At some point in the next 12 months, Lloyds Banking Group’s Trustees will be taken to court by its (unrecognised) union to determine what will be the position for occupational schemes with regards GMP equalisation.  The legacy of 40 years tinkering with the interaction between state and occupational pensions is unlikely to go away any time soon.

This year we will also see Pension Wise disappear and re-emerge with a new name, under new leadership bringing together TPAS and MAS. This reshuffle looks like absorbing considerable energy , though one wonders to what great effect.

And while all the deckchairs are being moved, there is a very real considerations for the Pensions Minister , one that demand more than a briefing from his civil servants.

The decision of 140,000 postal workers to defer a Christmas strike on the expectation of reaching a settlement of  their differences with Royal Mail has yet to prompt comment from Guy Opperman.

This is surprising. The current truce could be broken as soon as it becomes clear that Royal Mail cannot implement a CDC scheme because there is inadequate regulation for them to do so.

In my opinion, if DWP fail to act on the reasonable expectation of postal workers that they can have a DC scheme that allows their current pension contributions to accrue them a CDC pension, then blood will be on its hands. There is a very real expectation that the secondary legislation promised in 2015 but never written, will be completed with some urgency.

A tough choice for Guy Opperman

While the Pensions Dashboard is glamorous and even sexy, turning pension savings into pensions is not. As Hargreaves Lansdown’s submission shows, creating collective rather than individual DC schemes will ignite the wrath of the insurance and SIPP industry, who have their snouts buried in the swill of pension freedoms.

But the needs of the unadvised “silent majority” of whom the postal workers form a significant part, have not been met by the Financial Advice Retirement Review and the innovation sought by the Retirement Outcomes review is nowhere to be seen. Instead we have increased concern, crystallised by the issues facing BSPS members in their Time to Choose, that there is simply no obvious exit route from what is considered the burning building.

CDC is not designed to de-risk accrued Defined Benefit liabilities, but it does represent a better mass-market alternative than a self invested personal pension – for those who cannot stomach staying in their employer’s scheme a moment longer. Not only is CDC an alternative for future accrual, it could be a pragmatic alternative for a very large amount of money , currently in the wrong kind of SIPPs with the wrong kind of management. I speak with feeling as I have seen these products close up and the stench is still in my nostrils.

In creating a way for DC schemes to pay scheme pensions, the Minister can enable the great new master trusts that are taking the money from auto-enrolment, to provide the guided pathways into retirement, they have been asking for. CDC is the obvious retirement solution for the workplace retirement saver,

It is touch for an inexperienced Pensions Minister to take choices , especially when it means forsaking a project that only last month he was congratulating himself on. But I think it is time to say this loud and clear. The DWP must prioritise the present needs of the Postal Workers and help create a scheme fit for those who are currently stuck in products entirely unfit for purpose.

In doing so , they should not forsake the pensions dashboard, but return to the original conception – laid out by the Treasury last year – of limited intervention and maximum facilitation of market driven innovation.

In place of diverting the DWP’s limited resources into trying to build a digital annuity, the DPW should grasp the nettle and complete the work needed for CDC schemes to operate. There is resource at hand from the private sector to make that happen (if needed).

Let’s see the Pensions Minister stand up and be counted as a friend to the postal workers and those whose pension rights languish in inappropriate products.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Tough choices for our Pension Minister

  1. John Mather says:

    If only DB delivered on promises. Carrillion is next in line for a fudged rescue.

    The fall guy gets a minor rebuke at BHS others go off with the money

    And here SIPPS are all dammed because of the actions of a few opportunists

    But then I suppose attacking is the best defence when there is no defence

  2. henry tapper says:

    I am not talking about the rights and wrongs of DB John, I’m talking about what happens going forward; for the postal workers, for those who have transferred into unsuitable SIPPs and for the 10 million new savers who have no obvious pension option for their workplace retirement savings.

  3. Stephen Graham says:

    I agree the Pensions Minister has big issues facing him. Guy Opperman was involved in an end of day debate yesterday (From 17:01 onwards) on the plight of plumbing firms caught by section 75 employer debt legislation.

    The Plumbers’ Scheme has been able to maintain a funding surplus despite the pressures and offer plumbing firms a retirement benefit that outclassed DC compared with the same contribution levels. It seems a shame that a well run DB scheme could become the vehicle for the ruination of these oftentimes family businesses run by conscientious owners. This basically paints DB as a terrible option for small firms who don’t have access to all the professional advice of the large corporations and yet the retirement outcomes have been generally superior, particularly compared to straight DC.

    It would be good to see the Pensions Minister recognise that retirement outcomes are going to be significantly less under a lot of the DC plans on offer, particularly when employers/employees only have to pay a modest level of contributions in. The nation is going to face a crisis in the not too distant future. The crisis will put strain on the nation as a whole and is a crisis that the likes of the Joint Industry Board in encouraging businesses to participate in occupational DB schemes like the Plumbers’ Scheme sought to avoid, despite the accompanying commercial pressures.

    I am young (early 30s) and I feel my generation has a rather narrow focus on the present, with quite elevated expectations, the future is left on the sidelines skewed partly by observing parents who oftentimes did not have the same level of higher education but are enjoying by today’s standards excellent retirement benefits; not realising the fundamental shift that has occurred. Lets hope the Government recognises this and proactively targets educating our nation on the need to save prudently in light of the inadequacy of many of the current offerings, and allow regulatory flexibility for innovation on guaranteeing better outcomes.

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