It was good to see Steve Webb back in parliament, if only for the Work and Pensions Committee’s discussion yesterday morning questioning key players past and future
- Sir Steve Webb
- Baroness Jeannie Drake
- Baroness Ros Altmann
Charles Counsell, Chief Executive, the Pensions Regulator
Sarah Pritchard, Executive Director of Markets, Financial Conduct Authority
Caroline Siarkiewicz, Chief Executive, Money and Pensions Service
Irnoically, Baroness Altmann, who is a serving member of the house of Lords could only attend remotely, while Jeannie Drake – who had sat on the seminal Turner Commission sat next to Steve Webb.
Webb made it clear that whatever lack of progress discussed was down to HM Treasury’s apathy and inertia. The current clash between Guy Opperman and John Glen pales by comparison with the invective that issued forth in the opening salvos of the meeting. Indeed for those commentators who reported the event, his attack on HMT’s failure to help on Auto-enrolment and on pension tax-reform was the story.
Concensus on what needs to be done for the self-employed
Steve Webb called for the Work and Pensions and Treasury Select Comittees to lobby as one that the Treasury pays attention to workplace pensions and does not allow the 2017 AE reforms to disappear over the legislative horizon. Webb said he had given up on progress this decade but he assumes that nothing changes at the Treasury. Word from the village is that at least one Treasury minister has openly declared himself against Boris Johnson, in the current state of discord, who can see much further than the end of the month.
What was encouraging from the two sessions of yesterday’s meeting was the congruence of all behind the need to extend auto-enrolment to the self employed. Charles Counsell, current CEO of tPR and the man credited with making AE happen , was of a mind with Steve Webb who stated that the only way to improve take up of pensons by this group was through auto-enrolment as part of tax payments. I quote Steph Baxter in the FT’s Pension Expert
Counsell argued that in his opinion the tax system is the “most likely way to be able to get more self-employed people saving for pensions — something like through the annual tax return”.
This would involve using tax returns to default the self-employed into a pension with the ability to opt out, in a similar way to how auto-enrolment works.
According to the Department for Work and Pensions, the proportion of these individuals participating in private sector pensions has dropped to 16 per cent in 2019-20 from 21 per cent in 2009-10.
When asked why the self-employed were saving less and in lesser numbers, both MaPs (Caroline Siarkiewicz) and the FCA (Sarah Pritchard) declined to comment. In my expoerience, the vast majority of pension saving by the self-employed was through comission heavy non-workplace pensions sold through direct and restricted salesforces , operating as “financial advisers”. The retail distribution review of 2012 efffectively closed this sales channel. I very much doubt there is appetite to re-open it.
If we are serious about including the self-employed in the funded pension system, there seems no alternative but auto-enrolment (other than a return to a second unfunded pension system- a self-employed serps – paid by increased NI contributions). Charles Counsell spoke well and feelingly about how much work is still to be done to convince gig-employers that their workforce consists of “workers”.
But Steve Webb is probably right, the Treasury are not that serious about financial inclusion – witness the current position of pension credits – a Treasury initiative which can only reach 70% of potential beneficiaries because of a lack of a joined up DWP/HMT strategy (I speak here for the former minister).
What chance action?
Much of yesterday’s meeting was spent on stronger nudge’s to Pension Wise, the guidance/advice debate rumbling away at the FCA and the effectiveness of MaPs’ various guidance capabilities. But this part of the debate seemed second order to what had come before or indeed to the arguments put forward by Counsell on the need to improve AE.
But the trials on what works for the self-employed, the results of which are we told to be published this summer, are unlikely to tell us anything we didn’t know. We know that nothing short of impulsion through auto-enrolment will do.
It was refreshing to hear Steve Webb’s no nonsense approach which focussed instead on improving contribution levels to AE (especially from employers) , including the excluded self-employed (including the quasi employed gig-workers) and establishing strong nudges to sensible spending products rather than to guidance.
Webb threw down a challenge to Stephen Timms to take on the Treasury (jointly with the Treasury Select Comittee). Now is the time to do it. There is a chance of action and a lot depends on the capacity of Timms (a former Treasury Minister) to assert the need for change – we may not get a reform of tax relief but we are promised an extension of auto-enrolment by the middle of this decade.
This may sound like the worst of time to be talking about further payroll deductions but we were reminded by Webb yesterday that AE was implemented in the aftermath of the financial crisis – there is no better time – than now.