Altmann will have to tackle pensions piggy bank

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Altmann will have to tackle pensions piggy bank
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As any adviser worth their salt will know the challenges facing Ros Altmann, the new pensions minister, are significant.

She may well feel as if she is being pulled from pillar to post in the next few weeks. Consumer groups will have a shopping list for their ‘consumer-centric’ minister who was also nearly consumer minister.

It goes without saying she should resist some of their more outlandish demands such as clumsily price-capping income drawdown, though it may make sense to look at any overcharging outliers, where people haven’t had advice but stay invested by default.

The pension freedoms reforms, which she broadly supported, must surely be the key issue. Is Pension Wise fit for purpose? I would say yes, and I rate The Pensions Advisory Service’s chief executive Michelle Cracknell highly, but the question must be will people use it? Are the regulations governing the transfer from defined benefit to defined contribution fit for purpose?

Broadly I would say no, although I wouldn’t say they needed to be reduced to a level where there is a free for all. The advice requirement is sensible but the insistent client issue is a very difficult one. She also has to deal with the ‘freeing’ of in-force annuities some time soon.

Separately, Ms Altmann will also be dealing with many small business owners, many of whom voted Conservative, but who may resent what they see as the imposition of auto-enrolment.

She will have to encourage, cajole and ultimately threaten sanctions, though The Pensions Regulator may already be proving up to that task at least. Whether opt-outs rise with the increasing rate of contributions is another key issue. She must convince people – many of whom are still facing difficult times financially – that it is in their interests to remain in the scheme.

Yet the Tory manifesto plus the campaign pledges were…well, let’s just say not easily deliverable

Just to add to this controversial brew, there are those who may be about to lose out in the state pension reforms to be considered. The pension industry may welcome such flattening because it will usher in a much simpler regime, but that will be given short shrift by those who realise they are the losers.

In addition, any economist will tell you that the ‘triple lock’ guarantee is unaffordable in the long term, but that is going to be a hugely difficult message to convey to the grey vote. She may not have to of course, given how controversial such a measure could prove.

But that brings Baroness Altmann to another difficult issue. It is fairly clear that the Conservatives won partly because they were seen as more economically competent than their rivals.

Yet the Tory manifesto plus the campaign pledges were… well, let’s just say not easily deliverable.

Welfare cuts of £12bn are suggested and that must have some impact on pensions and savings. But the pledges made elsewhere all stack up to several billion; in fact, the opposition are now saying £20bn. Part of her mission should be to try and ensure that pensions are protected and that savings increase. Of course pension tax relief will remain a vexed political issue but the pensions piggy bank will run out eventually. More cuts to the lifetime limit below £1m will begin to significantly disincentivise pensions.

One final suggestion: don’t make advisers the whipping boys, make them your allies. We should all wish Ms Altman well in her task. And yet I wonder if it isn’t the most difficult job in this government.

John Lappin writes on industry issues at www.mindfulmoney.co.uk