Guy Opperman – Pensions Minister

Guy Opperman, UK pensions minister used his “grid slot” of a  one hour conversation with the Tom McPhail , myself and 100 pension professionals to announce a change of focus from saving to spending with a number of new policy initiatives arriving later this year.

Pensioner poverty

On pension credit, the Minister acknowledged the offer from the private sector to help in identifying candidates, promoting the benefit and automating the process to get pension credit. But he hinted at the need of reform of the benefit which he joked was a typical product of Gordon Brown’s time at the Treasury but which missed the target for  up to 30% of eligible claimants .

He promised a meeting with his senior policy makers in June to establish what can be done. This will be organised through the Pension PlayPen, so if you are interested in pensions , please register at http://www.pensionplaypen.com. You don’t have to be a pension person, just someone who cares about reducing pensioner poverty.

If you are an “outcomes driven” pension professional, you really ought to be concerned about the outcomes for those who don’t enjoy five star pensions as well as those who do! Now is the chance to show you care!

Of longer term import, the Minister suggested that if he were to get a further term in office , he would look to reform not just the way that Pension Credit claims were processed but the basis on which pension credit was calculated. This is the first time I have heard the Minister initiate any policy initiative relating to the state pension system. To me this is headline news.

Value for Money

To Tom McPhail’s question , the Minister confirmed that the DWP have intervened and taken back VFM from the FCA and tPR. Although his department are keen to deny this, there is no doubt that Opperman considers this too important a measure to be consigned to arcane discussions around 31 characteristics of a DC scheme or elaborate constructs in IGC reports, He spoke of VFM as a popular measure of worth that goes beyond the cost and charges debate to answer Tom’s question “how do I know I have got a good pension”.

Clearly the Minister has been influenced by what is happening in Australia and told the meeting that if you wanted to find out what the direction of UK policy, look no further than what was happening in Australia now. What is happening in Australia in this area is the disclosure of value for money though investment performance measures that allow people to work out what they are getting for their money and decide what to do with it going forward as an informed choice.

There will be a consultation on Value for Money arising from the work of Jo Gibson and her team. The Minister didn’t want to pin a date on it’s publication but suggested November 1st.

The VFM measure looks like it will be heading towards the simpler statement and seems to be focussing primarily on the outcomes of saving though the minister cited “customer service, awareness and oversite” as three subjective measure of quality which might make the cut. “Customer Service” was described as “dubious”, with the clear threat that pupils would not be allowed to mark their own homework.

Decumulation

I was accused of sounding like a stuck record on the pace of CDC reform. Frankly I don’t care if it’s called “CDC”, “Decumulation” or “Pension”, we need a better way of turning our pots into lifetime income than through annuities or drawdown.

If big employers like Royal Mail need an alternative to DB and DC employer funded schemes, how much more do those people who do not have such an employer need access to a way to turn their pot to pension?

So it’s with delight that I listened to the Pension Minister responding positively to my cajolement and promising an opportunity to put to supremo, Julian Barker, new ways of doing things. It seems to me likely that not all these ways will be “scheme ways” and some will be “fund ways” with the problem being solved by funds that manage not just the investment , but the insurance aspect of people living too long. We may actually have an investable  pension fund that does what it says on the packet. In this we need to see DWP , FCA and tPR working together.

There were two interesting questions on this, one from Adrian Boulding who asked about people’s ability to choose new ways of having their pot paid to them in retirement (secondary annuity market? – CDC transfer values ?CETVs on DB pensions in payment?). It was too complex a question to be dealt with at the meeting , but I hope that the seed fell in fertile ground!

The second interesting question was from Ant Donaldson, who asked whether the UK could look to Australia’s  Retirement Income Covenant for a model for the UK. For those not familiar this is a question about the choice architecture people get at retirement. The Minister answered positively (Australia today, UK tomorrow). This sounds like the investment pathway approach will develop around a strong nudge or possibly even a default option towards a preferred decumulation option (for the non-advised). My hope is that it is called a “pension”.

Auto-enrolment into Pension Wise is a non-starter

Despite a heroic and glorious attempt, Ben Stafford found his argument for a trial of Pension Wise Auto-Enrolment, shot down in flames.

The Minister said he’d been granted £4m from HMT to further trial his mid-life MOT, so employers with a mind to “do an Aviva”, should be queuing up outside Caxton House for a bit of help. Of the various initiatives Opperman talked about, this looks like the one that has most legs, but £4m is a drop in the ocean compared with what is needed to make us retirement aware midst career.

The news that the Queens Speech would not contain any news on the acceleration of the 2017 auto-enrolment reforms came as no surprise.

Pensions not Savings

Opperman is the Minister for pensions not lifetime savings. This important conversation was not about DB solvency , GMP equalisation, Pension Transfers or even pension dashboards (though the Minister did get in a “none of you are absolved for not being data ready” warning.

It was about the outcome of the saving, not about the saving and showed a Minister rather more interested in the plight of those trying to turn pots to pensions than professionals struggling to justify their ongoing bonsuses.

I thoroughly enjoyed the hour. I am taking some criticism for not being harder on the Minister, but why should I, the man is talking sense.

Thank you from the Pension PlayPen