Pensions minister Steve Webb has argued a full review of the myriad changes to pension legislation under the coalition should begin later this year under the new government and a five-year agenda set out to “fight the curse of incrementalism” in policy.
Mr Webb also lamented that “pensions policy is too fragmented” and that there is a strong case for doing it all in one place, rather than having initiatives spread across the Department for Work and Pensions and the Treasury.
During a session of the Work and Pensions Committee’s own review of the progress with auto-enrolment and wider pension reforms yesterday (12 January) afternoon, he was asked about what should be on the agenda for the next administration.
Mr Webb told MPs that waiting until 2017 - when a review of the government’s charge cap is due - would be redundant.
“My view is that we shouldn't wait until middle of next parliament, my immediate successor ought to early on look across landscape, see how things are fitting together, consult, and set out a five year agenda... this would help fight the curse of incrementalism.”
In terms of what he’d like to see highest on the agenda were moving the auto-enrolment minimum contribution level upwards of 8 per cent, looking again at pension tax relief, as well as renewed efforts to tackle pensions liberation.
Mr Webb also reaffirmed that automatic pension transfers - the ‘pot follows member’ system - could be up and running within 18 months, with full plans due to be published next month. He said it would initially be on an ‘opt in’ rather than ‘opt out’ basis.
“The best way to start is with the biggest 20 providers, who make up 90 per cent of the market, in order to get the infrastructure up and running.
“It is important that we can make sure those involved to begin with are legitimate, given that people [will eventually be] opting out rather than in, so we’ll be moving their money around automatically.”
Mr Webb added that while providers will have to pay for running costs in the short term, he promised “substantial” long-term savings for the industry.
Responding to questions about the new pensions flexibilities due in April, Mr Webb said the market would force providers to get up to speed on the new options and that if pension providers cannot lay on the new options people want, savers will simply take their money elsewhere.
“Short term we will see variations on existing products [and] I’m particularly interested in financial decision making later in retirement. There’s definitely a space for a product that ends up in an annuity as default; the issue of older old people is something we’ll have to come back to.
“Annuities will still have a part to play, but probably later in retirement and with hybrid products.”
In terms of his recently mooted plans for the re-selling of existing annuity contracts for those who want to make use of the at-retirement reforms, he admitted that it might not be right for everyone, but still wanted to find a way of doing it.
“So far I’ve had positive feedback in government... people always poo poo new ideas, but those I’ve spoken to around Britain are saying ‘good for you, get on with it’.”
Finally, the minister was asked about yesterday’s announcement on the guidance guarantee’s branding as Pension Wise, with particular questions on how far can the sessions go without becoming actual advice.
“The challenge is tailoring things to the individual, obviously certain material has to be covered, but the consumer is encouraged to gather information when session is booked, so it will be shaped by them to some extent.
“It just isn’t regulated financial advice, but you will come out of it with a summary and know where to go afterwards.”
peter.walker@ft.com
