A lot of people who think about pensions and policy will be trying to work out what has actually happened over the 45 days of misrule since Liz Truss took over.
We have lost the national anchor, our Queen.
We have experienced a blitzkrieg of right wing economic policy that turned into a pea-shooter when it met the economic reality of the markets.
The office of State that matter to pensions most – in the Treasury, is now occupied by someone who speaks the language of George Osborne. The DWP has a Secretary of State and a Minister for Pensions and Growth, both new to post and as yet unexposed.
There has been no policy development, other than the procrastination of the opening of the pensions dashboards till 6 months after the Data Available Point.
The promise made in the past week on the triple lock being maintained still stand, but as the promise was made by Liz Truss (albeit in lockstep we are old with Jeremy Hunt), we cannot regard it as a firm promise.
The future increase for the state pension, for pension credits and ancillary benefits and the result of the review of the state pension age, are all awaiting announcement. Most will be announced on October 31st.
That is what we know and can reasonably suppose.
Politics is still a threat to pensions
The most important thing for pensions is economic stability. The 30 year gilt rate is now below 4% which should not – were it to stay at that rate, to cause further damage to our pension schemes. Indeed, as I am constantly being told, it would enable pension schemes to feel comfortably secure and allow many to contemplate buy-out, and – if there is capacity – offload liabilities to insurers. This is taken to be a good thing.
But there are plenty of things that could increase the cost of Government borrowing and not all of them are under the control of our Government. There are existential threats in the East and pressure on our currency from the US could yet drive inflation so high that the BOE have no choice but to increase interest rates to levels we haven’t had to think about for decades. So funded pension schemes are not out of the woods yet and so long as they are exposed to gilts like many are, political factors remain at the top of their risk registers.
We are hearing the word “stability” a lot, it cannot be achieved without consensus and there is – as yet – no consensus in Government. Politics is a threat to pensions at present.
While the big picture stuff is driven by what the Treasury does, there is a lot of smaller stuff that needs attention. There will necessarily be a lot of scrutiny on regulation following the LDI crisis, the FCA will need to look at how LDI pooled funds were presented and allowed to become a threat to the financial system. TPR will need to explain its role in promoting LDI as a means of reducing risk well beyond its use as a short-term hedge against the initial impact of Quantitative Easing. TPR is about to see its CEO retire and the FCA has a relatively new CEO in place. There is a worrying lack of accountability on show as yet from either regulator and the PRA may well ask whether we have a prudential regulatory system beyond its doors. We need strong executive actions , clear accountabilities and named people prepared to put things right.
Then there are what Guy Opperman referred to as the 21 policies he left as work in progress when he left office only a few weeks ago. The Pensions Dashboard project, work on VFM, decumulation, promotion of pension credits, the development of auto-enrolment, consolidation, superfunds, CDC, pension engagement through simpler statements , statement seasons and a pension awareness week. These are the sexy jobs of a pensions minister. Less sexy, but arguably more important is the work going on behind the scenes to clean up the administration of the state pension.
This needs to be managed by people and the DWP teams were much in evidence in Liverpool; Chris Curry, Jo Gibson and Rob Carroll were visible and vocal. Des Healy, licking his wounds from Celtic’s European misadventure, is expecting to get his VFM paper out in December. Again, there is a lack of a focal point , an accountable spokesperson. This is not a criticism of Alex Burghart- all pension ministers keep their powder dry, but for many of us, his appointment was political, we had a functioning pension minister and maybe we will have him back. Either way, we need the pension policy agenda to move forward if we are to have any progress this parliamentary term.
So whether at the regulators or at the DWP, we need people who have overall responsibility for the management of the detailed policy we work on from day to day. We haven’t got them at the moment but I hope that following this latest hiatus, they will step forward. These people matter.
The likeliest outcome of the many on offer is that we go forward with Rishi Sunak as Prime Minister, there is a very real chance it will be Boris Johnson who returns to number ten. The third candidate – the least likely to be PM is Penny Mordaunt, we can discount others.
There is a possibility following one or other of these making it into the top job, that they call a general election, but I think it a slim one.
What I hope will happen – is what has been happening in pensions for many years – a pooling of talent between the major parties to run the country under a unified Government treating the current economic crisis as a real threat to our way of life.
I think this is a long-shot too, but as no-one else is talking about it, think it’s worth mentioning. There are some very good minds and a great deal of energy in the opposition parties that could be used to solve the problems that we currently face.
Pensions policy should be resilient and aimed at the long-term. We have learned over the past few weeks that good pensions can be shaken by bad policy. The inverse is true, good pensions can become better pensions by the implementation of good policy. We should not lose faith in the political process to make our retirement system better.
It’s been a whiz! On Pension Policy – did I see in one of your blogs that the legislator is slipping through a change in law that would prevent open DB schemes taking into account that they are ‘open’ and so would force them to be subject to the same ligature on funding as closed schemes? The previous easement was as a result of a specific amendment discussed and approved by parliament (2020, I think?). It was not ‘ a mistake’ to be corrected. Has parliament changed its mind? We know TPR hated the 2020 amendment as it allowed some modicum of independent thinking aside from the hegemony there are imposing. It is totally unacceptable for they to lobby and draft for the amendment to be removed without due explanation or scrutiny. This is exactly how we got into such a mess, where a statis one size fits all / they know best approach to pension funding led to a systemic failure of the system and removal of the government. No doubt the TPR legal dept spin machine will have more weaselly words of deniability, but this regulator needs to become accountable to someone.