You don’t really need satire when this is how Government sees things… https://t.co/QIlhmuBxKF
— Steve Webb (@stevewebb1) November 8, 2021
At yesterday’s Work and Pensions Select Committee meeting, Guy Opperman and John Glen were quizzed for two hours on a range of issues including the role of Government in ensuring savers make good decisions when accessing their pension savings, the availability of pension advice and the development of pension dashboards.
The meeting also looked at how CDC might be integrated into the choices available to savers and finished with a long and at times acrimonious discussion about maladministration of the state pension and compensation for those impacted.
As Steve Webb’s tweet implies, much of the discussion was so bizarre as to defy belief.
Mills says it won’t help the statement season “in the pub” if one individual has a statement setting out Investment Pathways options and the other hasn’t.
— Josephine Cumbo (@JosephineCumbo) November 8, 2021
What the session lacked and what current pension policy lacks, is any clear vision about what to do with all these savings we are amassing. Instead we roamed through a meadow where a thousand flowers are re-wilding.
Mid life MOT
Opperman clings to the successful pilot of his mid-life pension MOT. The trouble with the pilot is it happened within Aviva, an organization that is committed to improving financial awareness, resourced to give staff time off work to think about their affairs and with a clear agenda about for the financial MOT . That the idea is not catching on, is not surprising, like the Royal Mail’s version of CDC – this was a one-off.
While the Mid-Life MOT is targeted at the 45-52 age bracket, Pension Wise is for the 50+. We are still in “be nice to Pension Wise” mode and repeated mention was made of its high net promoter scores. But despite customer satisfaction, it is still only reaching around 14% of savers and there is precious little information about what is happening next (other than the collection of net promoter scores).
“Stronger nudge” targets 22% take up of Pension Wise
The Government’s campaign to get pension providers to nudge people to guidance is expected to increase take up by around 50%, but even then less than one in four people would be bothering with their free consultation. Nigel Mills showed impatience at the lack of progress. Opperman and Peter Searle, his civil servant charged with oversight at MaPS, stated again there is no plan to make guidance mandatory.
Guy Opperman was pressed to counter criticism from former Minister, Steve Webb, that the main innovation to come out of Government in Opperman’s time has been the simpler annual statement which Webb describes as “an analogue solution in a digital world”.
In a Statement Season
Opperman clearly doesn’t see simpler paper statements as controversial, he sees them as the stuff of pub talk, where those in later years bundle their statements together and make off to the pub to compare them with other like minded souls.
That vision is certainly controversial!
While we wait for the Pension Dashboard (s)
The dashboard has been promoted to the status of “one of this Government’s great IT projects” – as Guy Opperman called it. It will arrive a minimum of four years late and doesn’t look like being fully operational for some years after the 2023 launch date for the minimum viable product.
CDC a distant dream
From my understanding of the timeline for CDC development, we may just see the first CDC scheme (Royal Mail’s) at the back end of 2022, we won’t see CDC schemes in multi-employer schemes till at earliest 2023. The idea of a decumulation only CDC scheme (e.g. one distinct from employers and there just to pay pensions, is further out again. I recognize Opperman’s point that this regulation needs to be done right (and we will no doubt get some good CDC draft regs next month), but I hope that the roll out of CDC through master trusts and decumulation schemes – can be done together , rather than consecutively.
State Pensions back to BAU (gulp)
But the discontent with the delivery of dashboards, CDC and Pension Wise was as nothing to the Committee’s disgruntlement with the maladministration and poor support for those currently getting (or not getting) their initial payments from the state pension, Departmental problems go further , with Steve Webb’s well publicized campaign for widowers who have not been getting their full rights.
Guy Opperman’s repeated claim was that state pension administration was back to BAU. What is worrying is that BAU is such a mess.
DWP verdict – plenty going on – little of it effective
In short , the DWP’s various initiatives to improve pension decision making about how to spend our money is having limited impact and us currently failing to capture anyone’s imagination. There’s a whole lot of saving going on , but there is no clear focus on pensions. The State Pension problems are emerging on Guy Opperman’s watch but were many years in the making, the problems with Pension Wise, the Pensions Dashboard and the general failure to engage the public with the proper use of pension freedoms seems unlikely to be sorted down the pub.
The DWP is obsessed about saving but it’s yet to get round to “spending”; it is currently a department of work but not pensions.
John Glen had his opportunity to comment on last week’s dramatic closure of a loophole no-one new existed,
“The ABI would have preferred a universal ban on age protected schemes (below 57),” says Glen.
— Josephine Cumbo (@JosephineCumbo) November 8, 2021
The MNPA – cock-ups all round
The confusion created by retaining protected ages will continue – as reported on this blog. What was misreported on this blog was the role of the ABI- for which I apologize. I assumed that the ABI had been part of the problem but (as Glen confirmed) they had been on the side of simplicity from the start.
That notwithstanding, we now have left the public with the impression that they have missed out on something. This is a dangerous thing to do, especially as it applies to millions of people who will be reaching the ages of 55 to 57 in the next few years. We now look forward to explaining the different types of pot people will have in their portfolio of pots. This is not the way to make access to pensions easier.
The Treasury’s Advice initiatives no more successful
The below expected take up of guidance through Pension Wise is mirrored by the lower than expected use of advice at retirement. John Glen, who has responsibility for advice (rather than guidance) admitted that Treasury initiatives to allow advice to be paid for from a pension pot had not been a success.
The simple reason for this is that advice costs a lot more than the Pension Advice Allowance (£500) pays for. So even if you want your pot to pay for advice, it won’t. Most advisers are wary of taking on new customers on this kind of advisory budget so the allowance is not publicized. The more general problem is that people do not want to pay for advice on turning pots into pensions (especially when they’ve pre-paid for it through upfront commissions).
The taunts of Nigel Mills that contract based pension have pathways but occupational schemes don’t, was taken as an issue about the lack of joined up Government. But it is a more general criticism of the failure of Big Government to offer a consistent view of how we should plan our retirement finances.
John Glen said that investment pathways were doing what they were supposed to, without saying what they were supposed to be doing. If they are to be the mass market solution for turning pots into pensions then they will need to be trodden, the anecdotal evidence I hear from the market is that people aren’t using the investment pathways. This may change but I doubt it.
TPR don’t seem in any hurry to impose them on occupational schemes, it blames the FCA , the FCA blame TPR – in terms of sorting workplace pensions’ issues with pensions, the investment pathways aren’t getting to first base.
The Treasury aren’t really bothered about pension outcomes, they have bigger fish to fry and it really isn’t any of their business.
Verdict on the Treasury – pensions aren’t our problem
As with the DWP, the Treasury’s policy lacks any vision of what is to be achieved other than that people should have the freedom to manage their own affairs.
Sadly, what people are doing with their pension pots cannot be termed “sorting them out”. Pots aren’t being consolidated, they are being accessed – but mainly for tax free cash and only one in four of the pots reported on by the FCA’s retirement income study, is paying a regular income. In short, pension policies is not at the moment delivering pensions.
“You don’t really need satire when this is how Government sees things”
Steve Webb’s scornful jibe is aimed directly at the DWP and its Minister and indirectly at the Treasury.
Pensions needs some big-picture thinking. Without it we will continue to amass multiple pots which we savers don’t know how to spend.
The sensible strategy would be to focus on delivering two initiatives that could be game changers. The Pension Dashboard is one, CDC as a means to concert pots to pensions is the other.
All the other initiatives, Pension Advice Allowances, Pension Wise (with the stronger nudge) , nuancing the MNPA, simpler statements and the statement season are secondary.
The big issue is that we are saving into workplace pensions that don’t provide pensions and reaching retirement with no dashboard with which to plan our later life finances.
The DWP appears to be horribly slow in delivery, the Treasury horribly fast. Meanwhile millions of people are trying to retire with little help and unsatisfactory products, the Government just doesn’t see pensions through the eyes of those who don’t have pensions.