With the election fought and won, the new Labour Government has promised us a thorough review of workplace pensions.
The consensus view is that this should be about the 2017 auto-enrolment reforms, promised by The Theresa May Government for delivery in the middle of this decade. They haven’t happened but they are enabled. But do we really need a large scale review to adjust AE rates?
More fundamental issues lurk beneath the surface. The £40bn of tax incentives given to pensions need to be justified to the Exchequer, are they offering value for money or would this money be better deployed elsewhere – creating growth in the economy to enable us to afford better later life benefits out of general taxation (for instance).
Are our funded pensions behaving in the public interest or is the fiduciary duty confined to those in the funded pension schemes?
Should we be reviewing retirement income in the way the Australian Treasury is trying to? Are the tax rules surrounding the inheritance of pension pots encouraging hoarding rather than saving and how are we to help the millions who want a pension and can’t get the advice to do their pensions themselves?
You are cordially invited to join us at our next online Coffee Morning in which Calum Cooper, Head of Pension Policy at Hymans will discuss Labour’s pension review.
With the review planned by the new government, and with the mood music open to harnessing the wisdom of industry experience: together, this is a once in a generation opportunity to shape a better retirement for today’s workers.
In the spirit of co-creation and sharing, Calum will explore elements of a wish list for Emma Reynolds, the new pensions minister. But nobody has a monopoly on wisdom. If you could make just one change happen, what would it be?
Calum chairs Hyman’s Partnership Council, founding advisor to Clara Pensions and is responsible for Pension Policy at Hymans Robertson. He’s passionate about positive change and helping clients achieve their goals.
With a breadth of pensions strategy, risk and digital expertise spanning two decades, Calum brings a collaborative and creative approach to advice. Always focused on making progress against clear and shared long-term objectives.
Outside of work he’s an enthusiastic cyclist, rusty guitarist and a proud dad with two energetic boys Harris and the mighty Quin.
For readers of this blog, the event is free – use this link.
For paying members:
https://lnkd.in/eBZEYU-s
For non-paying members:
https://lnkd.in/eK5_5zTa
At the moment, I have two top priorities for DB, not sure which to pick. One is to allow sponsors and trustees to agree on using robust ALM instead of the discount rate process (which I’d like to ban, see discrate.com), which I suddyested to DWO review 7 years ago. The other is to require actuaries to explain and publish their best (or neutral) estimates so that prudence present (if any) can be observed.
On DC pensions (to be renamed PB – Projected Benefit – pensions), I would remove the ‘cliff-edge’ risk of pot conversion at retirement. We should transition from an accumulation fund (with a ‘growth’ portfolio) to a decumulation fund (with an ‘income’ portfolio) over a period of years ahead of actually starting to draw down an income. By sourcing pension payments predominantly from income generation, you substantially reduce the rate at which investments are sold and the associated market risk.
My proposal is to fund the currently unfunded civil service pension promises. This would be a small but tangible step forward in addressing the almost total lack of attention to the current intergenerational unfairness, that can be easily compared to a Ponzi scheme. Future service accrual would only require a return of CPI+1.7%pa and there is scope for some “practice what you preach”, on investment, with greater transparency on the £!.5tn of accrued liabilities requiring a return of CPI+3%pa. The move would also focus attention on the currently required actuarial valuation hypocrisy of the Regulations governing the setting of (employer) contribution rates, in particular the allowance for past service experience, requires the input of expected rather than actual GDP growth.