Yesterday morning (15 October), Shailesh Vara, spokesman for the Department for Work and Pensions, highlighted a written statement from Baroness Altmann, the minister of state for the DWP, in which she said there was too much going on for the government to commit to other changes.
The statement said that the government has decided that the time is not right to implement defined ambition, collective benefits and automatic transfers.
It said: “The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively.
“The market needs time and space to adjust to the other reforms underway and these areas will be revisited once there has been an opportunity for that to happen.”
For Trade Union Congress secretary Frances O’Grady, the decision to put off further reform of pensions is a bad one.
He said: “The TUC is deeply disappointed by the decision to postpone the introduction of Collective Defined Contribution (CDC) pensions.
“The result will be to leave too many savers relying on poor value old-fashioned defined contribution schemes.
“While we welcome Baroness Altmann’s continued support for collective schemes, we do not agree with her decision to halt work to introduce it.
“Dutch and Canadian workers already enjoy collective schemes which could boost workers’ pension savings by 30 per cent over conventional defined contributions schemes.
“In shelving this good work, the minister has denied British workers the opportunity to make the most of their hard-earned pension savings.”
However Margaret Snowdon, director at JLT Employee Benefits, backed the move by Ms Altmann.
She said: “Automatic transfers was fatally flawed from the outset, so it is great to see the pensions minister making a tough but pragmatic call. The cost of proceeding would have been very high for little benefit to anyone. Common sense has broken out.”
Association of Consulting Actuaries chairman David Fairs said:“With private sector defined benefit schemes mostly closed to new members and increasingly to future accrual by existing members, the deferral of DA to an unspecified date means the government must now lay out convincing plans to really boost pension savings over the years ahead.
“Only this week, we published survey results pointing to millions of employees saving very little and setting out proposals to increase minimum pension contributions over the next decade or so to around 16 per cent of earnings. With over 5 million at present – likely to increase to over 9m by 2018 – excluded from being automatically enrolled into workplace pensions, the need to set out longer-term plans to boost pension saving is paramount.
“We would stress that the onus on making sure any change to the pension taxation regime will genuinely incentivise more people to save more is heightened by the announcement. With many more employers likely to level-down their pension schemes due to the end of DB contracting-out from April 2016, there is a particular need to incentivise all employers to help their employees to save more”.
Kate Smith, regulatory strategy manager at Aegon said that the firm welcomes the pension minister’s decision to delay the implementation of automatic transfers until the completion of auto-enrolment in 2018.
“We believe this is the right decision given the volume of recent pension reform and the industry shouldn’t be distracted from the task of auto-enrolling millions of new savers into pension schemes over the next few years and implementing the new pension freedoms.
“Aegon has long argued that the best way forward is the creation of an online pensions dashboard where people can see all their pensions, including state pension forecasts, and potentially other pension savings in one place. This has far greater potential to drive up customer engagement, while driving down costs over time when compared against an automatic transfer process.”
“Collective defined contribution (CDC) is incompatible with the recent pension freedoms so it’s not surprising the government has decided against it. Under the Dutch CDC model, where this idea came from, people can only receive their pension at the time and in the format set out in the scheme rules which clearly goes against the trend towards greater flexibility.
Additionally, Ms Smith said there appeared to be very little appetite to implement a compex new form of pension scheme amongst employers who are focused on the successful roll out of auto-enrolment and giving access to the pension freedoms.
ruth.gillbe@ft.com