The Pensions Minister has called out the private sector for not having a long-term view. In this blog I call on his department to focus on a short-term strategy to deal with the problems facing people approaching and in retirement today.
Frustration over longer term considerations
I feel for the frustration shown by Guy Opperman in a recent talk to the PLSA is both political and personal. Politically he has struggled in his relationship with the Treasury. Only one of the two superfunds have cleared its acceptance , pensioners are not being properly protected from inflation and major initiatives such as the upgrading of auto-enrolment and the delivery of the pension dashboard are slow in coming. He is a junior minister starved of cash and carrying too little influence for the responsibilities he holds.
He has had some major successes, the design and delivery of the TCFD reporting means that UK pension funds are having to pay more attention to their purpose and from this spring further initiatives to scale down the number of pension schemes and focus on the investment of our pension funds on supplying the UK with productive capital. This entire part of the DWP’s pension agenda is heading in the right direction, there may be moans about interfering with “fiduciary duty” but few trustees will push back hard against the environmental, social and governance agenda
But much of his frustration must be with his inability to deliver. The Pension Schemes Act was delayed by the pandemic but it ended up a hugely unwieldy piece of legislation which has resulted in the DWP and tPR getting bogged down in consultations on secondary regulations , guidance codes and endless debate about dashboards, guidance and nudge.
Despite a lot of noise to the contrary, his support for CDC has been weak and overly focussed on Royal Mail, he hasn’t found a way of translating the concept of a “wage for life” into a popular concept such as “pension freedoms”. The pension dashboard was a hospital pass from the Treasury. MaPS has continued to be a drain on the levy delivering too little tangible benefit in terms of pension guidance, scam avoidance and losing the industry support enjoyed when TPAS was a separate entity.
He has focussed too much on marginal projects such as the Simpler Pension Statements and their “season” and allowed himself to get caught up in lightweight conversations about “engagement” while there are more important issues which get too little of his time and attention.
An immediate crisis for pensioners
Now , five years into his post, he faces the first crisis which threatens to derail his pension agenda. The DWP had a relatively easy Covid with the furlough protecting the funding of workplace pensions and , after the initial problems with markets and logistics in 2020, benign ,markets going back well over a decade.
The crisis heading the DWP’s way is out of control inflation with limited resources to protect the vulnerable from poverty. The Pensions Minister is not responsible for managing the economy but he is responsible for the administration of state benefits and here too little attention has been paid to
- the continued low take up of pension credits that ensure the poorest get tax-payer support
- the more extreme vagaries of the taxation system that discriminate against those who have been financially excluded – most particularly the disgracefully slow resolution of the net pay anomaly
- any targeted response to the current surge in inflation which (as a result of the breaking of the triple lock) looks like leaving those in retirement with at least a 5% real fall in their state pension.
For all the nose around “sidecar savings” and improving the financial resilience of those on the bread-line, there is nothing coming out of the DWP that suggests any help on take up of targeted (e.g. means-tested) benefits.
The need for a tactical plan to deliver this year.
I do not hold the Pensions Minister responsible for the administrative failings discovered with the State Pension, these are fall-out from the ambitious integration of state first and second pensions under Steve Webb and under-investment in systems over two decades.
But I do blame the Pensions Minister and his policy team for a failure to focus on the recent issue of economic inactivity of around 550,0000 people over 50 who have recently left the workforce.
Lifting the lid on “the great resignation”. It has been driven by men; aged 55-59; in full time jobs; with degrees. It has been funded by private savings and pensions. It has been led by a fortunate few. It should not be interpreted as “the new normal”. https://t.co/Bf9eDon7Vu pic.twitter.com/Pu0NzAVLeB
— Alistair McQueen (@HelloMcQueen) March 14, 2022
Here the issues of the increasing state pension age, level and take up of means tested benefits and the fundamental issue of productivity are matters that the Pensions Minister should be focussing and commenting on.
How much of the rise in inactivity rates at older ages is due to (1) increasing SPA (2) lower real state benefits on incapacity and unemployment and tighter qualifying rules. So a similar sort of point- inactivity pre SPA is optional for the better off and a struggle for others.
— andrew young (@glesgabrighton) March 15, 2022
The conversations on this subject should be matters of public comment and not confined to a small group of concerned individuals in the private sector. They need to be had now.
The crisis now hitting those on low-earnings will hit low-earning pensioners as hard as any. Now is the time for the DWP to be speaking for the financially excluded. This is a testing time for the Pensions Minister, I hope he rises to the test.