In a robust reply to the recommendations of the Work and Pensions Committee, the DWP has resoundingly said “no” to calls to implement “in the short-term” , the reforms it said it would implement in the middle of this decade.
In its response , the Government continues to reference that time frame for implementing the reforms. “The middle of this decade” no longer gets referenced. There has been no change of policy. The message I hear is that while everybody wants to see bigger pensions – especially for the low and middle earners who are excluded from either DB pensions or the means to accumulate private wealth – the Government is saying “now is not the time”.
The Work and Pensions Committee’s inquiry examined four areas
• Whether households in the UK have enough pension savings for retirement;
• What advice and guidance people need when saving for retirement;
• Support for the self-employed and ‘gig economy’ workers;
• Measures to close the gender pensions gap.
There is push back on a number of recommendations made by the Committee
Recommendation one; Make Pension Wise compulsory
The Government accepts that we don’t have enough savings but suggests we could do more with what we’ve saved , rather than impelling people to save more.
It rejected again calls to make Pension Wise appointments compulsory. the DWP is monitoring calls to Pension Wise but it does not seem overly concerned that despite every effort to nudge stronger, appointments are only up 20% year on year. The vast majority of people accessing their pension savings are doing so with paid-for advice or on their own.
The DWP is exploring the architecture of choice and – my reading – looks more interested in ways to turn pots to pensions than to promote freedom of choice.
DWP Conclusion – maybe not – not bothered.
Recommendation two; Set out a road map to increase saving by March of this year.
The DWP looks in no mood to do any such thing and has responded bluntly
We provided our last report of undersaving as measured against the Target Replacement Rates (TRR) in the Automatic Enrolment Review 2017. As promised in our letter to the Chair of 26 August, we will provide an update of our analysis as soon as the data is available.
DWP conclusion; In our time – not yours.
Recommendation three – promise the 2017 reforms in next parliament.
The Work and Select Committee have recommended the Government introduce the necessary legislation (for the 2017 reforms) no later than the beginning of the next session of Parliament. It must also publish a timetable for consultation on implementation, taking account of cost pressures on employers and workers.
The DWP respond they’ll do this “at a suitable opportunity and when parliamentary time allows”
DWP conclusion; this is not in our hands.
Recommendation four and five – Trial auto-escalation now
The WPC want to see action before the end of this parliament. The DWP make it clear that this is not part of the Big Government Plan
the government is focused on economic stability and growth, which supports higher wage levels and opportunity for increased retirement saving in future
DWP conclusion ; get real.
Recommendation six; get a plan for the over 40s who don’t have time to save enough
We are committed to demonstrating the benefits of working for longer, to move to a more partial retirement or more flexible working arrangements as a starting point for some savers.
DWP conclusion ; work longer
Recommendation seven; the Government should expressly commit to the continuation of the triple lock
We remain committed to ensuring that older people can live with the dignity and respect they deserve, and the State Pension is the foundation of state support for older people
DWP conclusion; no such promise
Recommendation eight ; include self-employed in AE through NI
we advocate further work on how best to incentivise long-term saving for SE people
DWP conclusion; in the “too difficult box” – parked with Nest Insight
Treasury conclusion; operationally impossible – over our dead bodies
Recommendations nine and ten; Give gig-economy workers more protection and pension.
BEIS points to its track record in this parliament on this
The DWP points out
The Pensions Regulator is responsible for maximising employer compliance and monitors developments with the gig economy, taking action where appropriate to ensure businesses meet their Automatic Enrolment obligations
DWP and BEIS conclusion; we’re all over this
Recommendation eleven; set up new schemes for people we never thought workers who don’t fit.
We, therefore, aim to consult soon on potential policy proposals to accommodate well designed and well-run multi-employer and master-trust CDC schemes to operate either on a sectoral basis or wider.
DWP; we have no idea what to do with multi-employer CDC but this sounds good
Recommendation twelve on “carers credits” to boost AE contributions (and reduce the pension gender gap)
The DWP says
The 2017 review looked carefully at excluded groups, including those providing informal care. At the time, the conclusion –following extensive input and consultation – was that there should be no change to the way that carers are currently treated through AE.
DWP conclusion; not even the 2017 committee went for that.
Recommendation thirteen – define the pension gender gap and reduce it
Any target to reduce the gender pensions gap could only be considered once a suitable definition has been agreed upon
DWP conclusion; work in progress (don’t hold your breath)
To be continued
This takes us through the bulk of the recommendations, there are 11 more which I will deal with in part two of this analysis.
The robust tone of the responses from the DWP suggests a change of position. There is less now of the “engagement agenda” and more emphasis on making the best of what there is. The expansive agenda of Guy Opperman’s first term is now being honed into certain key initiatives
- Putting the state pension at front of stage
- Relying on the existing AE framework to do the heavy lifting
- The Pension Dashboard, deliverable in this parliamentary term
A couple on a household income from the state pension of £20,000 (index linked) are well on the way to a comfortable standard of living (PLSA). It is hard to see how increasing AE savings rates will make a material difference to living standards – other than for those in younger cohorts. We need to look very closely at who is being targeted for increased contributions.
We also need to ask what those with small DC pots are actually getting. Currently DC saving for most people is for a windfall payment when they get to 55 or when they defer to , which is effectively a parachute payment out of work. If that is the plan – fine – but judging by the noise about getting 650,000 over fifties back into work, it doesn’t sound a joined up plan!
More thought on how we take our pots back is necessary, perhaps a subject for a future inquiry?
The WPC inquiry is about “Protecting pension savers – five years on from the pension freedoms: Saving for later life” –
The bulk of protection that savers enjoy is through employment. The Pension Dashboard is the big new idea, Pension Wise continues to support, but the opportunity to accelerate retirement savings through auto-enrolment must wait till Britain finds its financial and economic stability again.
Considered industry view. Damian Stancombe has produced a thought piece on linked in , I assume inspired by the conversation between DWP and the Work and Pensions Committee