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PLSA proposes bold savings reforms but legislation no easy task

PLSA proposes bold savings reforms but legislation no easy task

The Pensions and Lifetime Savings Association (PLSA) used its annual conference in Manchester this week to lobby on two ambitious ideas - new retirement income targets and consolidation of defined benefit (DB) schemes.

However given the government’s parliamentary preoccupation with Brexit, the message coming from the Department for Work and Pensions (DWP) was these ideas are unlikely to surface as legislation at any point soon.

The PLSA’s DB superfund idea was laid out in its DB taskforce paper last month and aims to see a new scheme created which trustees can opt to transfer into with members promised their full benefits ‘in more than 90% of cases’.

The concept of a superfund was brought forward by the DWP in its green paper on DB schemes in February and was discussed by DWP’s director of private pensions Charlotte Clark during the conference.

It seems clear consolidation will be included within the DWP’s white paper on DB schemes, which is expected by February 2018, but Clark said the government is not likely to go down the mandatory consolidation route.

‘It seems unlikely to me we will enforce consolidation. We might incentivise consolidation and set up structures to make it easier,’ she told the conference.

But even if the government does go down the DB superfund route, Clark also made it clear there is unlikely to be a pensions bill in front of parliament before 2020, meaning the concept could be years away from coming through in government legislation.

The PLSA also called for the introduction of retirement income targets in a recent consultation which would give savers goals for what they need to save to get the retirement lifestyle they want.

Graham Vidler (pictured above), the PLSA’s director of external affairs, said to the pensions minister Guy Opperman this was an area the industry wants to see improvements in.

‘One area where we have looked at ourselves and said we are not serving our members well enough is giving people an idea of what a decent retirement income might be in terms they can understand and comprehend,’ he said.

In response Opperman said he had briefly read the PLSA’s consultation paper but emphasised his commitment to getting people ‘match-fit’ for retirement and laid out four ways he wants to achieve that: the pensions dashboard (he announced the DWP is is taking over this project); the extension of auto-enrolment; the mid-life MOT idea and the single financial guidance body.

These ideas are going to demand a considerable amount of resources from Opperman and the DWP over the coming months and years.

The single financial guidance body is currently part of the Financial Claims and Guidance Bill which is about to go through the House of Commons – Opperman said he was hopeful the Bill would become law by March 2018 ‘if all goes to plan’.

Opperman said we ‘should be in no doubt the dashboard will happen’ but gave no timescales on when and at what point the government will legislate, only commenting he would provide an updated next Spring.

As for the pensions cold calling ban, New Model Adviser® reported last week it is not going to be included in the Financial Claims and Guidance Bill meaning it may not become law until early 2019.

On this Opperman gave the rather vague statement that the government will ‘legislate when parliamentary time allows’ (it does not sound like it will be tomorrow).

The auto-enrolment review will be published before Christmas, Opperman said, but again if legislation is required (for instance if the self-employed will be included in the system) this could be years from coming into action.

The PLSA’s ideas, both the DB superfund and the retirement income goals, are positive steps which will be beneficial for pension saving.

But with a parliamentary agenda so packed and existing policies taking so long to come into effect, the DWP will have its work cut out clearing its desk of the work it has already pledged to carry out before it can even start new projects.

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