At yesterday’s Pension PlayPen coffee morning we had the forward thinking Julius Pursaill talking about fiduciary responsibilities. There was frustration in the room, we were talking about a world which was not changing.
It was before the publication of Hymans Robertson’s report on its way forward. I was chairing part of the meeting and it became clear as we talked that the group of us were worrying “nothing is going to change”
I had READ THIS REPORT and I do think that we can change our pension system and how it helps Britain turn itself round
It became clear during the meeting that Hymans Robertson are advocating collective endeavour between large pension schemes , employers and the public (for whom the fiduciary responsibility is indented). This is radically different from the world that master trusts (which Julius was talking of) represent.
They are still linked to the failed world of retail choice, but their clients want to be offered a solution that is broadly consistent. We are not talking a world of competing ISAs but of collective pensions which work together. That is the world offered us by Hymans, this blog and foreign commentators such as Per Andelius who comments later in this blog.
Comments too from my friend John Hamilton of Stagecoach and Richard Smith who has done to make Pension Dashboards an advertisement for pensions and not pots
We are at a time of great strain on the British economy, we have had two decades of stagnation and pensions have been part of that stagnation. Though there has been some movement forward, most obviously in a properly increasing single state pension and through auto-enrolment, we have lost out in providing pensions, we have lost our second state earnings pension and have yet to deliver a new order through a pension dashboard.
My pre- publication of the Hymans report!
I could only point towards my “distillation” of the report which I had published by accident prior to its formal launch, read and reported from a hospital bed.
Here is Callum’s proper introduction
We left nothing for the way home.
There are big pensions problems: adequacy, inclusivity, sustainability. There are massive fiscal challenges requiring growth. Companies and workers are facing cost increases, uncertainty and a challenge to buy a first home. We need huge investment in our energy transition.
Lots of problems…
But what if we could unpack the potential of pensions to meet all these challenge and more?
As a team we set ourselves this challenge late last year. We spoke to clients, friends and industry. To find a way to leave pensions and people better than we found them.
Here’s one way.
Our latest policy paper, ‘The untapped potential of pensions’ outlines how through our packages of proposals the:
📈Treasury could gain £28.5bn annually
🏢Employers could save £14.2bn a year
💷Create a £1 trillion national wealth fund over the next decade
🧓Provide workers with over 50% more retirement incomeRead to discover more on how our proposals could improve equity, unlock tens of billions of pounds annually and align pensions policy with national prosperity.
Question: do you think the scale of the challenges we face merit the scale of these solutions? What would you do if you ruled the (pensions) world? Rt Hon Rachel Reeves Jo Gibson
This is an important report by a proper consultancy and here is another report – this time from my Swedish correspondent Per Andelius
Hymans Robertson proposes ‘cost-neutral’ overhaul of pensions
The consulting firm has published a policy paper outlining reforms it claims would improve pensions incomes by 50% while saving employers £14.2bn a year and bringing £28.5bn a year for the Treasury. The changes could also fund a £1tn wealth fund over the next 10 years, it claims.
In ‘The Untapped Potential of Pensions’, Hymans says £100bn a year could be made for the UK by the government and employers through its proposals. They include a flat-rate pensions tax ‘top up’, phasing out the triple lock and raising auto-enrolment contributions, among others.
In combination, this could create a £1tn UK National Wealth Fund, as well as fund the UK’s net zero transition and enable GDP growth of 3%, the paper argues. In addition, Hymans says it would enable improving auto-enrolment and pensions for the self-employed.
“The promised second phase of the Pensions Review presents an opportunity to make lasting changes to give people financial independence in later life for as long as they live. But it’s also an opportunity to meet other important aims, such as improving equity, unlocking tens of billions of pounds annually and investing in UK economic growth at a huge scale,” said Calum Cooper, head of pension policy innovation. “This is a once-in-a-generation opportunity to align pensions policy with national prosperity.”
Cooper admitted that the proposals “would be a huge job for the pensions industry to implement” but warned of the risks of inaction.
The paper’s key proposals are:
- replace traditional tax relief with a flat-rate government ‘top-up bonus’, and making all retirement income tax-free, bringing forward £22bn a year in revenue;
- regulatory reform on DB surplus release to generate £3bn a year in tax receipts and channel over £400bn into productive UK assets;
- incentivise the adoption of collective defined contribution schemes by giving employers a 1% reduction in minimum contributions, saving them £1.2bn a year and the Treasury £500m a year, as well as potentially set up a public whole-of-life CDC provider through the Pension Protection Fund;
- phase out the triple lock once the state pension reaches the minimum retirement levels advocated by the Pensions and Lifetime Savings Association, saving the government £3bn a year from the late 2030s;
- invest in UK productive finance and growth assets, with a national wealth fund targeting £3 of private investment for every £1 of public money, with capital raised from private sector DB, DC schemes, the Local Government Pension Scheme and others;
- gradually increase minimum auto-enrolment contributions from 8% to 12% with a ‘sidecar’ savings account and removing the £10,000 earnings threshold, while allowing pension pots to be used as collateral for first-time property purchases – the Financial Conduct Authority’s chief executive, Nikhil Rathi, recently said the latter could be included in an upcoming discussion on the mortgage market;
- set a default pension provider for self-employed workers and extend auto-enrolment and ‘sidecar’ savings to them, potentially through self-assessment tax returns.
To finish – read this
John Hamilton
Short memory on the Farage contribution to imposing Brexit on the U.K. The man has no shame.
in the US does Trump understand what the USA street protests mean for the mid terms and a lame duck president he will be at that time?
His explanation of tariffs was troubling as explained in the Washington Post.
https://youtube.com/shorts/KmVBfI4_6a4?si=9SHMXmRUZW_gzS5K
Would you invest the Swansea steelworkers pension fund in blast furnaces? If not why would anyone else. The U.K. has the coking coal ( I believe they import this) and limestone but where does it get iron ore? Imported so how is the U.K. strategically independent?
https://www.geostrategy.org.uk/britains-world/britains-steel-industry-is-at-a-crossroads/
As for investing pension funds are you suggesting the same managers, who gave us LDI, to be in charge.
Gotta be anything but LDI. Saddened where entering LDI (2) now. Another own goal. Was always gonna happen, Trump tariffs being the trigger this time.
Those schemes with leverage will see their scintilla of growth assets disappear to cover the collateral (ie the security given to the banks for their,losses)
More than ever, its grow or die.
The strapline on the Hymans paper from Per Andelus was odd (“cost neutral”?). Thought the messaging would be £42bn p.a. in tax / savings, and the generation of £1trn fund, on a cost neutral basis….