Savers need not worry about how the pension scheme bill defeats will affect their pensions as it is “inevitable” these reforms will resurface soon, industry experts have claimed.
The MPs in the House of Commons shelved a number of bill amendments last week, which could have seen savers better protected from scams and guidance becoming the norm.
But Margaret Snowdon, president of the Pensions Administration Standards Association, said it was “inevitable” these measures will be introduced at a later date once politicians have had a chance to properly consider all the issues.
Ms Snowdon said: “There was an unhealthy rush to get the pensions bill through without amendment and some sensible things were voted down.”
Meanwhile Steve Webb, former pensions minister and partner at LCP, said just because an amendment is defeated, it does not mean it was a waste of time.
The fact it was tabled in the first place means it has been debated and had some focus.
Mr Webb said amendments are not always rejected because the government disagrees with the basic idea, but it could be because the wording is not right to be part of the law, or the government plans to achieve the same goal through a different route.
It could also plan to address the issue but at a different time.
Mr Webb said: “The defeat of these amendments does not mean that important debates on issues like financial guidance, carbon-neutral investing or combatting scams are now closed.
“Although this legislation has now nearly completed its progress through Parliament, there are always new consultations, legislation and regulation from the Department for Work and Pensions, the Pensions Regulator and the Financial Conduct
Authority, and these are all ways in which these important agendas can be advanced.
“The MPs who tabled these defeated amendments have nonetheless done an important job in getting these issues debated and higher up the government’s agenda.”
Others were pleased the amendments were shelved as they believed they had not been properly considered.
David Brooks, technical director at Broadstone, said: “In general I think the rejected clauses, while well intentioned, lacked the full consideration needed when making changes to pensions legislation.
“We would all like members to make better choices, trustee money to be used wisely and scams to cease. But hastily written legislation is not the way to achieve these things.”
Signposted guidance
The Commons voted down by a majority of 89 votes an amendment that would have required the government to write to members five years before they could access their pot, offering them a Pension Wise appointment.
Ms Snowdon said this could be at the detriment of savers as they will now have to actively seek guidance and “act in isolation at the most crucial time of their savings journey”.
But others were less convinced the proposals would be successful in their current form as individuals do not appear to be receptive to guidance as it stands.
Mr Brooks said the mandatory booking of an appointment would be “very difficult” to achieve effectively as people will still not necessarily be forced to take guidance.
He said: “Pension Wise should be a complementary element to advice and guidance. The government would be better served reviewing the advice and guidance market as well as mandating shorter retirement packs from insurance companies.”
Tim Morris, independent financial adviser at Russell & Co, agreed this measure needs more thought before being put into law.
He said while advance planning was “paramount”, five years is not enough time to act as “an effective call for guidance”.
Scam warning
A clause that would have seen trustees given the power to pause defined benefit transfers where a fraud was suspected was also defeated, which came as a blow to those campaigning against this issue.
However, the government did commit to introduce regulations at a later date that will see transfers blocked if “red flags” arise.
Ms Snowdon said: “Trustees will be able to stop transfers that show signs (red flags) of being a scam and possibly even to require guidance for certain other flags. A double win. We’re working on defining those flags.”
Everyone is in agreement that scammers need to be tackled and so the debate is around the powers and who should be able to take action and when, Mr Webb argued.
He said: “Personally I support giving trustees more powers to block suspicious transfers, but there’s a legitimate debate to be had about the best way to do it.”
But Mr Brooks again said the clause needs more thought so that trustees are not riddled with complaints from disgruntled members.
“Stopping a transfer because a scam is suspected would seem to put trustees in a difficult position and it seems right this clause was rejected for more consideration,” Mr Brooks said.
“Trustees need the power to refer suspected scams to a third party, Action Fraud or similar. It should be officials that determine whether or not a scheme is suspected of a scam action.
“Trustees acting unilaterally will only waste time and money on court action due to conflict with unhappy members.”
The pension schemes bill will now go back to the House of Lords for their consideration of amendments, the last step needed before a bill can receive Royal Assent and become law.
amy.austin@ft.com
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