Much to the delight of the PR brigade of the insurers!
Chancellor Rachel Reeves is expected to announce a shake-up of UK pensions in her Mansion House speech on July 15, including plans to look at the amount companies and their staff set aside for retirement.
Two executives familiar with her plans said Reeves would appoint a commission to lead the long-awaited review into pensions adequacy, looking at auto-enrolment rates alongside the state pension and retirement savings of the self-employed.
Exactly what this will mean , we will have to wait 10 days for, perhaps the UK will do what the Australians have done and outsource the management of retirement wealth to the private sector by means testing the state pension. Perhaps the unfunded public pension regime will be the biggest CDC arrangement the private sector ever gets. Idle speculation will no doubt swirl around the corridors of the IA and ABI.
Elephant in the room – or in the rubbish bin?
But the big elephant in the room is the mandated auto-enrolment contribution rate.You will remember that the pensions industry is generally against mandated anything but this is not the case with pension contributions. Since 2017 the workplace pension providers have been expecting mandated pension contributions to go up and the middle of 2025 has now gone with not so much as an announcement.
In case anyone missed it, here’s news from the Pension Minister, passed on by the FT.
Pensions minister Torsten Bell said at an event hosted by the Institute for Fiscal Studies on Wednesday that auto-enrolment rates would not rise during this parliament, indicating that some changes resulting from the review may take several years to implement.
That’s a few cashflow projections for the rubbish bin then…
Outsourcing state pension to the private sector – I don’t think so!
I am still reeling from the view of a master trust provide at the Accenture adventure on Wednesday that
“we all know the reason for forcing workplace pensions to pay default pensions is so that the Government can drop the state pension!”
Well I know that u-turns are in the Rachel Reeves driving book but the government has vowed to protect the triple lock and though Torsten Bell has criticised it in the past , it is the one thing we have to show for all the extra national insurance contributions we are paying.
If those pension providers expect to see more auto-enrolment contributions then it looks like another u-turn on national insurance, if they want to see less state pension increases then it will make the abolition of fuel pay look a minor gamble. The Government did not get away with changes in fuel pay because it was their money that was paying for it and I suspect that many people see national insurance as the extra pension contributions they are having to pay to get a better pension.
In case anyone hasn’t worked it out, the big deal of the Pension Schemes Act is the conversion of savings plans into pensions through default decumulation into lifetime income. What was the PLSA has worked this out and have changed their name to emphasise Pension (UK) at the expense of “lifetime saving”.
My bet is that the Mansion House event on 15th July will see Rachel Reeves announce a lot of consultation but very little by way of promise. The heavy lifting has already been done and it’s not involving increasing mandatory contributions into workplace pensions.