It was good to see Guy Opperman speaking at Professional Pensions Live. This is my take on his speech and the direction of Government pension’s policy as we come out of lock-down and into the summer recess!
Recently Guy and Flora Opperman lost their twins at birth. We are all mindful of his and his wife’s well-being. It was good to see him back in action yesterday and speaking about the long term. Yes we need pensions in the long-term but we also need a long-term pensions minister. We seem to have one.
The long-term future of the planet (bouncing back)
The long-term was the theme of Opperman’s address and at the heart of it, as had been the case when he last spoke in public to the PLSA in March, were his words on TCFD and the reporting on ESG in general.
For the three minutes he talked of “building back better”, Opperman seemed to be enthused by the certainty of his being right – he sounded like a man on a mission. He argued that even where a scheme held nothing but Government and corporate bonds, the threat of climate risk to the creditworthiness of the assets sill needed to be tested.
He talked tellingly of the impact of sustainable investment on the employer covenants of some DB schemes and he talked of the threat to member outcomes where DC schemes do not properly protect members against the risks posed by the environment, social changes and poor governance, Quite clearly, his heart is in the sections of the Pensions Schemes Bill that demand strong TCFD disclosures from trustees. Trustees be aware, the Minister is not for turning by PLSA or TPR,pls
A spectrum of option for employers
It is clearly in Guy Opperman’s head that he is building a range of options for employers providing pensions for their staff. He talked of the Pension Regulators “flexible” Db funding code. I can’t see much flexibility in it myself (its Fairs-way or the highway) but perhaps he was referring the Bowles Amendment going through to the Pensions Scheme Bills which will give DB schemes the chance to have a long-term future if they want. More on this shortly.
Opperman’s support for CDC was stoutly defended. It needs to be as we have not seen much enthusiasm for CDC outside Royal Mail (and this blog). Opperman talked of CDC being neither DB nor DC which is dangerous talk, it most certainly is a DC variant, losing CDC into the mess that Steve Webb created with the “many flowers” Defined Ambition nonsense, would be a mistake. Instead the Minister would be well advised concentrating on DC as a means of sorting the outcomes of the hundreds of thousands of savers who will be constipated spending their savings (even with the investment pathways).
As regards consolidation, Opperman is clearly a collectivist. His wrestling through of the superfund agenda, against the ABI lobby and Treasury opposition is a personal triumph, There is a consultation on superfunds and illiquids but we are unlikely to hear on it till September, the job is already done. If I were Eddy Truell, I would be gratified to hear the Minister proposing superfunds as a home for the kind of long term investments that Opperman has been promoting, Surely Opperman is right to see long-term run-off funds , annuity backing and open DB as the homes for illiquids. Let’s hope that the charge-cap consultation puts paid to illiquids in DC.
The spectrum for employers starts with closing DB and running DC, consolidating DB into superfunds, buying out DB with an insurance contract right the way across to keeping DB open (Bowles)and going forward with CDC. So long as all employers are on the spectrum, I support that.
Pension Bill and consultations keeping the Department busy
Clearly there are too many consultations outstanding. The Minister listed 6
- the call for input on the charge cap(rather dismissively referred to as “meeting a manifesto pledge” – this doesn’t seem one that the Minister’s too excited about
- jargon free simple pension statements– apparently the response is weeks away, this is all about whether the statements will be allowed to say something meaningful on costs and charges. There were no questions on this so the Minister wasn’t drawn,
- aforementioned consultation on illiquids – kicked back to September
- consultation on superfunds – superseded by interim regs
- trialing for the self-employed (this sounds as successful as tracing on the Isle of Wight). This is a dead end for Government and needs re-thinking
- financial inclusion work – I wasn’t clear if this was a current consultation or an ongoing nag from a minister with “inclusion” in his title. The current focus seems to be on employers
(links are to blogs on here dealing with the underlying issues)
Easily the most important item for Government is seeing through the Pension Schemes Bill. In line with his mantra of pensions being for the longer-term, Opperman told those on the broadcast that there was unlikely to be much opposition from Jack Dromey, the shadow pension minister, apparently pensions are too long-term for politics.
The big ticket items in the bill now include many Lords amendments and Opperman did not make any statement on whether he was similarly as one with Ladies Altmann, Drake and Bowles. I wouldn’t be surprised to see some push back on the amendments 52 and 63 to the pensions dashboard. By and large the Lords debate (which ends today with the third reading, has been one of the most interesting discussions of pensions I have seen in the past twenty years and when we have this Bill as an Act, it will be the better for them.
The speech started with a drum-roll for Rishi Sunak’s support for auto-enrolment. The broadcast ended with the Minister losing bandwidth as he was asked about pension taxation. We now know we should blame 5G and Chinese intervention not the Treasury.
It didn’t spoil an interesting and engaging appearance.
“but perhaps he was referring the Bowles Amendment going through to the Pensions Scheme Bills which will give DB schemes the chance to have a long-term future if they want. More on this shortly.”
Is this something that could be considered by DB Pension Schemes that have already de-risked e.g. The British Steel Pension Scheme (BSPS2)?
I ask this because the Scheme appears to be heading for a buy-out within the next few years.