Mixed fortunes for pensions
What a year 2011 has been for those of us working in pensions. It has gone in a flash, and in no small part that has been due to the continuing breakneck pace of change from the Coalition Government.
I have come to he conclusion that the coalition is manned by politicians who entered Westminster never really believing that there could be anything other than an overwhelming Labour majority, and they are desperate to get as much done as possible before someone throws a temper tantrum and crashes the coalition, causing an election and the return of normal service.
We started the year in January with a paper from The Pensions Regulator on achieving good member outcomes from defined contribution schemes. My personal tip here is if you pay good contributions then you will get a good outcome. Flippancy aside, this indicates a fresh interest in DC from the regulator. I mentioned this at the recent Personal Finance Society seminar series and the audience reaction was that now we would have two regulators to deal with, The Pensions Regulator and the FSA. It will be better than that as the FSA is itself splitting into two next year, so I think we will be dealing with three regulators for pensions now. It will be regulatory heaven.
In March Iain Duncan Smith, secretary of state for work and pensions, at last got out his speech on the proposed flat-rate state pension. One of the worst-kept secrets of the coalition, it seems that this concept although viewed as utopian within the DWP, it is viewed with deep scepticism within the Treasury. Cost concerns may have something to do with pensions minister Steve Webb claiming that he has already probably spent more than any minister before him in history by applying the triple-lock indexation to the basic state pension. Well done Mr Webb, generations of pensioners will toast you each year. And by the time they have caught up with a rapidly retreating state pension age, they will deserve it too.
Spring also saw the release of the Hutton report on public sector pension reform, and the start of difficult negotiations that led to what was virtually a national strike on 30 November. I met several trade unionists in London that day and have picked up a natty ‘hands off my pension’ banner that is now displayed on my desk. It might just stop my employer from joining what Hutton called “the race to the bottom”.
Summer brought a degree of realism among larger employers that auto-enrolment was going to happen and that they needed to get planning quickly to avoid doing it all in a panic at the last moment. I still cannot understand why finance directors keep asking me what is the most this could cost them, if nobody opts out? It must be an accountant’s sort of thing, but the idea of 0 per cent opt-out rate just does not feature on my radar. My own guess is 45 per cent opt-out. That is rather less optimistic than the DWP’s central figure of just 25 per cent opt-out, but even if it is as high as I expect, we will still be introducing another 6m Brits to the joys of pension saving.