Pensions  

Will Treasury 'insider' be a reforming pensions secretary?

Will Treasury 'insider' be a reforming pensions secretary?
(Niklas Halle'n/AFP/Getty Images)

Since Iain Duncan Smith resigned as work and pensions secretary in 2016, all but one of his predecessors have measured their time in the role in months rather than years. 

The only one to have stayed longer than a year is Thérèse Coffey who was in the role for around three years. In contrast, Chloe Smith had the shortest tenure of just 19 few days.

So with Mel Stride as the newest DWP secretary, how will he fare as he steers a department that is facing many challenges over the short and long term?

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Described as a Treasury insider, many believe this will help to foster a more joined up working approach between the Treasury and the DWP.

Important parts of pensions policy such as pension tax relief and the regulation of personal pensions and self-invested personal pensions are governed by the Treasury rather than the DWP.

With Stride's background as a former Treasury minister and also as recent chair of the Treasury Committee, there will be aspects of the pensions landscape he will be familiar with. 

“He should bring valuable understanding of the wider pensions landscape,” says Sir Steve Webb, a former pensions minster and partner at LCP.

“Because of the link between tax policy and pensions, and the fact that Treasury jealously guards its stewardship of all tax issues, it can sometimes be reluctant to be open with other departments – including the DWP – about tax measures that may be relevant to pensions policy, such as changes to lifetime allowance or annual allowance levels.  

“Hopefully having a Treasury ‘insider’ at the head of the DWP will improve the chance of joined-up pensions policy.”

Baroness Ros Altmann, a former pensions minister, agrees that Stride’s background and knowledge of the Treasury’s thinking around pensions will help to close the disconnect between the DWP and Treasury on pensions policy.

Altmann adds: “I think Mel Stride will be able to understand the financial aspects of pensions, but also the constraints that any secretary of state responsible for such a huge spending department will face. 

“There are many areas of policy that need Treasury input, such as the problem with net pay schemes in auto-enrolment, which force the lower paid workers to pay a 25 per cent penalty for their pensions.”

Net pay schemes will not be the only pressing issue facing Stride.

There is the conundrum of how to manage a rising state pension age in a country with vast differentials in healthy life expectancy.  

More long-term, Altmann says older people need help to stay economically active, while employers need to be encouraged to retain, retrain and recruit people into their 60s, which can enhance people’s lives in their later years as well as boosting the economy.

She says in the longer term it would make sense for private pensions to be taken out of the DWP and moved into the Treasury, perhaps with a different name that reflects life savings or future investing, while state pensions stay in the DWP as they are a state benefit, rather than a savings vehicle.