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Industry condemns Treasury and DWP Chinese wall

Industry condemns Treasury and DWP Chinese wall

Industry figures have decried the lack of joined-up thinking between HM Treasury and the Department for Work and Pensions with regard to private pensions and pension savings.

Leading the complaints is ex-pensions minister Steve Webb, now director of policy at Royal London, who said there are two separate different "world views" which prevent coherence in government.

"Savers and the financial service industry need a consistent and unified voice from government, not a divided one", he told FTAdviser.

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In June this year, Mr Webb said the Lifetime Isa could pass into law without being subject to scrutiny of the House of Lords, as a result of HM Treasury taking “absolute” control of pensions, resulting in retirement policy that was not subject to review in the upper house.

Mr Webb told FTAdviser: "The fundamental problem is that we have two departments - HM Treasury and the DWP - two pension regulators the FCA and TPR - and crucially two world views.

According to Mr Webb, the Treasury sees itself as a long-term savings ministry, with the Isa as its flagship product - simple, popular and well-understood.

On the other hand pension tax relief is "expensive and probably doesn't do much to incentivise the average saver", he said.

"The balance of power between the Treasury and the DWP world view can be seen by the way Isa allowances have been hiked up in recent years whilst pension tax relief limits have been slashed, he said.

Former pensions minister Baroness Ros Altmann told FTAdviser the DWP sees private pensions as fundamentally important, but the Treasury is worried about the costs of the incentives for private pensions.

In July this year, Baroness Altmann revealed she had recommended putting HM Treasury in charge of private pensions.

At that time, she tweeted: “I suggested to government last year and last week to move private pensions to Treasury in a new pensions plus long-term savings brief. Is that happening?” 

Baroness Altmann has been vocal in concern the Lifetime Isa could derail auto-enrolment.

"One of the things I wanted was for all private pensions and pension savings to be brought together in the Treasury. It is not helpful to have a bit in the Treasury and a bit in the DWP." 

She said: "If that had all been under one roof maybe there would have been more care taken over the requirements of setting up a pension."

"Power is definitely shifting towards the Treasury and away from the DWP. It does not make sense to have most pensions in the Treasury and a minister sitting in the DWP who does not have enough power or control."

Neil MacGillivray, head of technical support at James Hay Partnership said the lack of joined-up thinking is visible in the launch of the Lifetime Isa, which could see people choose paying into it instead of a workplace pension.

"You'd think with something as basic as pensions, the DWP should be actively involved in any decisions.