Regulation 2.0 (and how to pay for it).

 

I am on something called the Pension Regulator’s Stakeholder group which means I’m supposed to champion tPR .I get meetings with MAPS (which always get cancelled at short notice) because I represent something out there called “innovation”.

But in truth I am no champion of tPR and think MAPS as innovative as a plastic bag polluting the beach.

If Government wants its “arms length bodies” to get properly funded, those bodies had better show themselves worth funding first by publishing a clear business plan into which the private sector can choose to invest (or not).

The DWP has just completed a consultation on how its arms length bodies, tPR, the Pensions Ombudsman and MAPS are funded (the general levy)

The problem is that these arms length bodies have decided to become a whole lot more expensive.

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Nobody has put forward a good argument for why we should throw a whole load more money at this problem , the solution is – it appears – to find the best way to transfer money from member’s pots to civil servants’ pockets.

The stock response from Government is that the “pensions world has changed”, but the link between increased expenditure and change is not clear. At least in the case of MAPS, there is no business plan to back up the assertion that more money is needed.

I’m grateful to Ian Neale and Aries Insight for pointing out

When the “Single Financial Guidance Body” was announced nearly three years ago, the Government declared that it expected levies overall would not increase – and might even decrease “as the efficiencies generated from merging the three current services into a SFGB begin to materialise”.

Ian  thought then that this was optimistic and predicted steadily increasing levies. The Government stated then it had no plans to widen the funding base.

The government proposed four options to increase the levy, favouring an option, which would see a rise of 10 per cent in 2019-20 rates on April 1 2020, with further increases from April 2021 “informed” by a wider review of the fee.

Other options included a phased increase over three years of 45, 125 and 245 per cent, respectively, or over 10 years starting in 2020 or 2021.

These staggering increases will be born on a headcount basis, meaning that rich schemes like USS with high per member funding will pay little , while schemes like Smart, People’s, NOW and NEST will be landed with huge levies based on huge membership but with precious little in assets over which to recharge the extra costs.

Put in terms which ordinary people will understand, those who have least will pay most, while the schemes that have most will pay least.

That is not a recipe for fairness. Since MAPS, the biggest drain on the levy has failed to publish its magnum opus for 2019 – its business plan, I am siding with the big master trusts in their very real objections to paying more for something that is delivering less.


Conspicuous failure at MAPS

I won’t comment on the Pensions Ombudsman as I have too little to do with it , to make any kind of judgement.

As regards tPR, it has had some success, the master trust authorisation process went well and it continues to bask in the glory of auto-enrolment implementation (which it did well). It has adopted a pragmatic approach to DB regulation which looks strategically sound, forcing small schemes into a one size fits all strategy (unless they pay to be different) and focussing on managing the risks of large scheme failure. However tPR is inefficient in its work, lacking in outside accountability and anything but transparant in its publication of impacts and forecasts.

But it is MAPS that should worry the DWP and all in pensions. It is the amalgamation of TPAS, MAS and the various bits of Pensions Wise which fell outside these two. It is currently leaderless , having lost its CEO a few months into the job. It has failed to deliver the one thing it promised to deliver – a business plan. It is haemorrhaging staff and the quality of its delivery on pensions (since the departure of Michelle Cracknell) has fallen off a cliff.

“MAPS has a death-wish” as one former DWP minister told me. It is asking to be funded by the pension poor but it is doing little for the pensions poor except spend their money.


My advice to DWP

I will be watching Britain’s Great Pension Crisis with Michael Buerk and Felicity Hannah which airs Wednesday December 4 and 5 at 9:15pm on Channel 5.

My advice to DWP is that it does the same and that while watching, it asks whether it is really doing what it can to help those most in need.

We have a half-built system of universal benefits that needs every penny it can get. We have crazy plans to spend every penny (we don’t have) righting the wrongs of pension miscommunication in the past. And we are considering denuding the pension pots of the poor to pay for arms length bodies who are simply not worth the money.

Darren Philp of Smart  speaks better than I can, as he is policy Director at Smart and at the coal face.

“While we understand the need for levy financing to meet expenditure in the short and long term, we cannot support the proposals outlined in this consultation paper, which present knee-jerk solutions to a long-term and structural financing problem with the general levy.”

Gregg McClymont of Peoples speaks to the same point.

“The per member structure made sense in a world of long-term employment, where a smaller proportion of the workforce had access to workplace pension saving. But auto-enrolment is a small pot-creation machine, because it’s, rightfully, brought in a new group of people with lower earnings who move from job to job much more frequently.

“It’s completely unfair that these savers carry the heaviest regulatory burden, with master trusts paying the highest cost.”

These quotes are taken from an excellent article by Maria Espadinha of Pensions Week which you can read here

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in advice gap, age wage, pensions and tagged , , , . Bookmark the permalink.

2 Responses to Regulation 2.0 (and how to pay for it).

  1. Ian Neale says:

    When the “Single Financial Guidance Body” was announced nearly three years ago, the Government declared that it expected levies overall would not increase – and might even decrease “as the efficiencies generated from merging the three current services into a SFGB begin to materialise”. We thought then that this was optimistic and predicted steadily increasing levies. The Government stated then it had no plans to widen the funding base.

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