There are several reasons why the focus on Brexit will not prevent our legislators and regulators from coming up with new ways to keep us busy in 2018.
The first is that regulators such as the FCA still have to get on with their day job, even while MPs are otherwise engaged. The FCA can introduce rules and regulations which have statutory force and can even close businesses down using their existing powers.
One area very likely to be in the FCA’s sights in 2018 is the regulation of defined benefit to defined contribution pension transfers. Last summer they published a consultation paper (CP17/16) on the advice framework around transfers, and we are likely to see the final version in this year's first quarter.
This will retain the assumption that transfers are generally not in the members' interest but will expect advisers to start from a ‘neutral’ position in each individual case. Dealing with the tension between those two requirements will certainly be a challenge for advisers.
Linked to the new rules around transfer advice, I am hopeful we will see new guidance from the Pensions Regulator, requiring company pension schemes to supply standardised ‘template’ information about member benefits alongside transfer value quotations. Hopefully this should help to streamline the advice process and mean fewer quotes lapsing because the three-month deadline has expired.
We can also expect the FCA to publish the next stages of their ‘retirement outcomes review’.
This is mainly likely to focus on the poor outcomes at retirement facing those who do not seek financial advice, but there could be knock-on effects for advisers and providers such as greater regulation of drawdown products or mandatory ‘guidance’ before pension cash is taken.
A second area where we are always at risk of change is taxation. Even though Parliament is pre-occupied with matters European, the Treasury always sets out a Budget and has a Finance Bill to add to the stock of legislation.
Hopefully in 2018 (unlike in 2017) we will only get one Budget and this one in the Autumn. In March we will simply get a ‘fiscal statement’ and hopefully the chancellor will resist the temptation to include a series of ‘gimmicky’ announcements to spice up what is otherwise likely to be a rather dull event.
The Autumn 2017 Budget did not bring changes to pension tax relief, which was good news for those who want to see some stability in the tax system.
But one reason why the chancellor did not come after tax relief was that he managed some Treasury sleight of hand on his borrowing numbers. We cannot assume that he will be able to pull the same trick again in 2018, so further ‘salami slicing’ of tax relief limits remains on the cards.
In terms of other changes, the department for work and pensions is likely to have a busy year. Although Parliamentary time for new legislation is likely to be limited, they will be publishing a white paper on DB pensions in February, and this is likely to come up with new ideas for encouraging DB pension schemes to consolidate as well as to make sure member pensions are effectively protected in the event of corporate insolvency.
The Department for Work and Pensions will also be thinking how best to take forward recommendations of the 2017 Automatic Enrolment review. Some of these will simply be ‘good practice’ guidelines but things like a lower starting age for AE would require legislation.
Whatever the outcome of all of these reviews, we can be sure we will have plenty of change in the pensions world throughout 2018.
Steve Webb is director of policy of Royal London
