Where does pension policy go under this new Prime Minister?

 

It is two-and-a-half months – 76 days – since Boris Johnson said he was resigning as prime minister, draining his already crippled government of its remaining authority.

And then, a little over 48 hours after Liz Truss became prime minister, the Queen died. What many described as a zombie government had been replaced by a Trappist one; politics understandably falling silent during the period of mourning.

To what extent, pensions are noisy depends firstly on whether Guy Opperman returns to post (he is not currently pensions minister)

Secondly it depends to what extent pensions are brought to heel and pension issues suppressed. There are two huge issues on the horizon

1. The potential reversal of the increase of the state pension age as called for by LCP referencing the changing trending in mortality. The chances of the Treasury conceding an inch on this are next to zero, Lucy Neville- Rolfe is a Treasury enforcer.
2. The rules surrounding EU Solvency II are likely to be eased to allow insurers to invest more speculatively when backing bulk and individual annuities, any changes will also have deep impact on the with and non profits funds held by insurers to meet other liabilities.

These issues have the capacity to move the dial on the resources that the Treasury must plan for future infrastructure projects and in particular to replenish the national insurance fund which is going to be depleted if the triple lock is maintained. It has knock on effects, increasing the rate at which defined benefit schemes use insurance to buy-out liabilities and narrowing the potential advantage that superfunds have in competing with insurers.

In “big picture” terms, the preoccupation of the DWP with pension dashboards, midlife MOTs , value for money and consolidation , are “local” issues. The budget for the midlife MOT project offered Guy Opperman was embarrassingly small. It is dwarfed by the monthly bill for remedying the manifold problems of the State Pension which is suffering a hangover after years of systems neglect made more painful by changes to the state pension age and the closure of S2P in 2015 as we move to an integrated single state pension.

Those achievements of which the DWP were rightly proud, the implementation of TCFD reporting for instance, could be  downgraded by a  Government looking  to fracking gas rather than net-zero as a solution to our energy problems. The worry is that the “nice Guy” politics of Opperman will be replaced by a more brutal regime which  ignores the inequalities of the net-pay scandal, pours scorn on “pension awareness” and scraps any increases in auto-enrolment under the mantra “no new taxes”.

This dystopian vision of pension policy is the alternative presented to us by a new Government that has already dispensed with the Treasury’s principle strategist, Sir Tom Scholar. Kwasi Kwarteng, the new Chancellor looks in no mood to listen to liberal arguments from the DWP, I fear that pensions will be in lockdown for the remainder of this parliament.

I could be wrong. The alternative would be a return of the liberal views of Opperman and his team which were allowed relatively free rein in recent times. John Glen and Guy Opperman may not have been best friends when in office but they ended on the same side , backing Rishi Sunak (who now looks a dangerous back-bencher to an increasingly fragile Government).

In the absence of anything but a pension minister in tutelage, the noise on pensions would come from the back of the House of Commons and from the Lords where Baroness Altmann and others continue to be a thorn under the skin of conservatives.

This may sound depressing, but there are positives. Much of the pension awareness agenda makes little sense in the face of the enforced austerity that is now upon us. Pension savings rates will suffer. People will leave pension schemes because they cannot afford the contributions and because they don’t want to pay tax on accruals. Few have thought through the impact of a 10% CPI linked hike in accruals of the LGPS on annual allowance bills.

Pension awareness is more likely to focus on the affordability of the required savings rates rather than their adequacy. A more realistic approach to pensions is needed – one not driven by the one-eyed vision of a nation with universal retirement wealth but one with adequate income to meet household bills in later life.

For all that , I hope that we may find a third way where the agenda of the Treasury and DWP are more closely aligned and where continuity is prized over political opportunism.

Hope that continuity will be prized over political opportunism