The Sun has spoken, the Pension Schemes Bill is one for its readers, not the readers of the Pension trade press.

I doubt that many pension experts are waking up this morning with good thoughts about the impending Pension Schemes Bill. I have written about what the Bill IS here

This blog is about making sense of five notable omissions from the statement made by the Government about what the Bill will contain.

1. Nothing on adequacy;  From Andy Briggs down, the pension industry has expressed dismay that the Bill does not bring forward increases to the auto-enrolment contribution scales that would nudge millions of us to pay more of our salaries into our pension pots.
2. Nothing on the PPF as a consolidator; while the Bill promotes private consolidators such as Clara and the currently dormant Pension SuperFund, it says nothing about extending the reach of the PPF to become a central discontinuance fund.
3. No plans for a super-levy to the PPF; LCP and Steve Webb in particular will be annoyed that its plans to allow strong DB schemes to buy complete protection from the PPF with a super levy have not been adopted.
4. No plan for pot consolidation above £1,000; the pot follows member and pot for life proposals don’t make it to the cut
5. Nothing specific on CDC; though the popularity of CDC as a decumulator may be increased by the onus on trustees to offer pensions from pots, there is nothing in the bill to enable this to happen. Decumulation CDC still seems some way away

Making the best of what we’ve got

Rather than bringing new ideas to consultation, the new Government has done a pick and mix on the consultations of the past five years and decided to get things done within the constraints of existing pensions law.

The two regimes of DB and DC look to be promoted over CDC which is looking a bit like the SDP in the latter stages of its political life.

DB scale up

DB looks like being a scale game – as it was expected to be when the pension superfund consultations started in 2018. The DWP and TPR hoped back then for industry wide schemes working on a mutual basis, they ended up with two proposals, both backed by private equity of which Clara remains, Pension SuperFund being mothballed. Clearly this is not what the DWP wanted and it will be interesting to see whether the Government will tempt Truell and others back to the table. Right now Capital Backed Journey Plans are keeping private equity occupied while they await a substantive change in attitude from legislators and regulators.

There is nothing in the Bill to suggest that TPR will get more powers, it will have to make its best way home with the DB Funding Code which may or may not see the light of day in 2024. What remains of the original intention limps along, hardly fit for purpose post the LDI debacle and higher for longer discount rates.

The PPF will be disappointed not to get a starring role in the consolidation program. However, they can continue to help the market as they do now, by setting the bar high on delivery.

DC pensions

DC will change; people in master trusts (most of us)  will get proper pensions offered. Look forwards to many master trusts becoming hybrids as they provide DB sections using capital-backed schemes the first of which is Pension SuperHaven.

The alternative will be money purchase bridge to buy-out schemes with drawdown leading to a deferred annuity purchase with little certainty about what money will be left to buy out. This flex-now , fix later looks an alternative that works for insurers and platform managers but will offer precious little certainty to the saver on the Clapham Omnibus.

Occupational schemes that can’t find a way to accommodate those who want a certain income for life at an acceptable price will find themselves up against it on value for money tests.

We await to see what the VFM test will be on, but I would be surprised if it didn’t include some greater evaluation of the DC scheme’s capacity to turn pot to pensions.

The VFM test based on net performance looks too weak to change general change, a VFM test based on capacity to deliver what TPR have been calling a “full pension service” would have teeth. It looks a better way of delivering what people want than Australia’s Retirement Income Covenant which looks full of intention but lacks steel.

Pragmatism on consolidation

Labour has chosen to duck the big projects of either pot follows member or the lifetime pot and stick with proposals to rationalise small pots using force majeure (carousels and the like). This will solve the immediate problem for master trusts who may well go bust unless they can find a way to swap many small for fewer bigger pots.

For most people, the pensions dashboard remains their best hope of organising pots in advance of consolidation. Let’s hope that in the weeds of the Bill, the Government can rewrite the DWP’s transfer regulations which are causing havoc at MaPS and with those trying to transfer small pots.

The right bill for pensioners , the wrong bill for the pensions industry

The Pension Schemes Bill is a surprise and a welcome one. It puts pensions first, industry second. Indeed it puts pensions back into workplace pensions and offers a reasonable chance that both DC and DB pensions will run-on long enough to make them a source of productive finance to the country as a whole.

This is not a Bill for the insurance industry, it does not promote buy-out or buy-in of annuities and instead promotes consolidation of DB schemes through commercial occupational schemes (superfunds).  The annuity industry may make something out of DC defaults but I suspect that we are more likely to see the capital backing of private equity for scheme pensions, which look a more interesting proposition.

Whether the insurers will return again to running DB pensions (something they haven’t done this century) is an open question.

But I see this second Pension Schemes Bill as radically altering the playing field in favor of pension schemes.

It looks a much easier Bill to implement than its predecessor – the 2021 Act was nearly four years in the making. Barring a pandemic or similar calamity, we might well have this Bill on the statute books this year. That would be “getting things done”