Laura Trott is the new Minister for Pensions with responsibility for pensioner benefits including the State Pension, private and occupational pensions, and oversight of arms-length bodies such as the Pensions Regulator pic.twitter.com/sJrwy9IQ2d
— Department for Work and Pensions (@DWPgovuk) November 7, 2022
The new pensions minister looks to need no help from me but I hope that what I’m writing will confirm to those who read these blogs that the priority for the new Minister for Pensions is not to look after the interests of the pension industry
Her responsibilities include:
pensioner benefits, including new State Pension, Winter Fuel Payments, Pension Credit and Attendance Allowance
private and occupational pensions, including regulatory powers and the National Employment Savings Trust (NEST)
Social Fund (Cold Weather Payments, Sure Start Maternity grants and Funeral Expenses Payment scheme)
oversight of arms-length bodies, including the Pensions Regulator, Pension Protection Fund, Financial Assistance Scheme and Pensions Ombudsman, and Office for Nuclear Regulation
methods of payment, including Post Office Card Account
They do not include the taxation of pensions (Treasury) or the regulation of large parts of private pensions , including the provision of regulated financial advice.
Managing messages about the state pension and benefits
Within a few days, Laura Trott will have to manage the message from the Autumn Statement around the uplift of the state pension and of pension credit.
Within a few weeks, she will have to manage the message coming out of Lucy Neville Rolfe’s State Pension Age Review.
She is already receiving brickbats from WASPI on showing no appetite for championing their cause.
The Minister for Pensions will have a baptism of fire in her first months. She will need the support of her department and her ministerial team. I have said it on this blog but the team and the department are strong.
Focussing on the needs of vulnerable pensioners
There is a limited amount that the private sector can do to help those vulnerable to deprivation of food, heat and basic shelter. But pensioners in poverty do look to the DWP and the pensions minister for the implementation of policy that relieves hardship.
Laura Trott’s first and most acute problem is the impact of the cost of living crisis and – as with Guy Opperman – her role will be shaped by the political position adopted by Jeremy Hunt and Rishi Sunak on November 17th.
There is a big shopping list from the PLSA , ABI and the vested interests that surround them. They include
- The implementation of the 2017 AE reforms (realistically this looks a long-shot within this parliament)
- Provision of the pensions dashboard, (again unlikely to be fully operational within this parliamentary term)
- Creation of a standard for value for money (a project under Des Healey that is expected to kick off in December)
- Harmonisation of retirement choices for those in work and non workplace DC plans. This is again at early stages and is likely to be increasingly concerned with (5)
- The development of CDC and Superfunds both as alternatives to annuities and bulk annuities (decumulation) and as a means of keeping occupational pension schemes open.
There are a number of other public/private initiatives on the table . They include the engagement agenda including pension awareness day/week, simpler statements statement season and statement seasons. These may be considered “nice to haves”.
This is the legacy that Guy Opperman has left her, she can expect that most of these projects need little from her in the short term. She must focus on the heavyweight issues that impact pensions and pensioners and be ready to hit the ground running.
I would be happy for Trott to leave existing policy initiatives to make their way forward – she need not overly engage with the pensions industry on these issues.
But there is one pension industry issue hat does demand her immediate attention.
The poisoned chalice that she inherits is the DWP’s own DC funding regulations and what lies behind them – TPR’s DB funding code. The LDI crisis showed how bonkers the funding position of Britain’s DB pensions is , to all but those who run them. At a recent seminar, one (lay) DB pension expressed consternation that her scheme , which had lost 20% of its assets to collateral calls from the banks behind the scheme’s LDI program, was declaring itself “more solvent” because of a rise in the long-term gilt rate.
What is bonkers to most people – from steelworkers in Port Talbot to the CEOs and CFOs who had overnight demands for loans from their pension schemes is how the crisis was allowed to happen , under the noses of such a sophisticated group of pension experts. The Work and Pensions Committee, the Treasury Select Committee and yesterday, Sarah Breeden of the Bank of England are asking “just why were risks so badly managed?”. I spoke to the CEO of one major DB consultancy yesterday afternoon and put that question to him, we agreed to differ on the answer.
The DWP is going to have to take a view on whether LDI was simply a badly managed solution or the symptom of a badly managed funding system. Since 2004, the current pension valuation system , based on a controversial accounting standard , has held sway. In September, the industry’s solution to its demands, came close to freezing this country’s credit system. Those who believe that Trussnomics were a 1/1000 black swan, may consider the DB funding code fit for purpose. However, nearly everyone else is asking the DWP to go back to the drawing board.
The most important job that Laura Trott can do in the next two years is restore the confidence of the Treasury and then the country, that our DB schemes are properly managed, not just for the good of the pension system , but for the security of the wider economy. Her relationship with Mel Stride is important, as the former Chair of the Treasury Select Committee which has heard extensive evidence on this issue, he will be her mentor.
A great time to do the job
The job Laura Trott has been given (thankfully shorn of its “financial inclusivity” co-title) is challenging , exciting and I hope it will be rewarding both for her and for us.
There is a chance for her to help us manage our way through this winter and the ongoing cost of living crisis which we will be in for some time.
Her job is not going to be about pension awareness – we are more than aware enough of pensions right now. Her job will be to rebuild confidence in our pension system.
I wish her luck, I strongly suggest that she stays away from the usual suspects -including me and that she focusses on the heavyweight issue of the ongoing funding of DB and the critical issue of managing the cost of living crisis as it impacts the elderly.
Laura Trott – we wish you well.