Long Read  

New DWP boss has much work ahead of her

Workplace pensions

In terms of wider pensions policy, a new ministerial team probably needs to step back and reassess whether all the different things going on at the moment represent the right set of priorities.

One of the most pressing issues, and one where policy has really been in limbo for the past five years, is driving up the amount of money going into workplace pensions.  

This year we celebrate the 10th anniversary of automatic enrolment and pretty much everyone accepts that getting 10mn people saving into a pension for the first time is a huge achievement.

But once the celebrations are over it will be necessary to grasp the nettle on getting contribution rates up to a more realistic level. The DWP ran a review of auto-enrolment in 2017, which recommended a couple of modest but sensible reforms.

These were to start auto-enrolling at age 18 rather than age 22, and to apply the mandatory 8 per cent contribution rate to all earnings and not just a band of qualifying earnings.  

Unfortunately, this 2017 review report has sat gathering dust for the past five years. Although the DWP has signed up to the conclusions, the Treasury has blocked implementation, presumably because of the additional cost in pension tax relief that would arise if people saved more in a pension.  

Some will argue that now is not the right time to ask employees or employers to put more aside for their pensions when they are struggling with the cost of living and the cost of doing business.  

But at the very least the new ministerial team could make sure that the necessary legislation is in place so that, if and when the time is right, the step up in contributions can be implemented straight away rather than with a further delay.

Progress is also stuck in others areas such as creating a legal framework for defined benefit pension superfunds, which could help DB pension schemes meet their obligations more cost-effectively, and the new team will need to resolve the conflicts across government, which have held up that legislation.

To be an effective government minister you do not just need good policy ideas, you need the political skills to get buy-in for them across government and in particular from the Treasury. I wish Smith and her team well as they go into battle.