While the UK’s endless political brouhaha continues, there were some pension policy developments with a long-term bearing on the public’s finances or more specifically the public’s future finances.
There were at least three pension stories of note last week, one that could prove to be a significant policy development, one that represents a significant warning and another which some argue represents a blow to pension saving or at least awareness.
FTAdviser reports a Department for Work and Pensions warning that 12.5 million people are undersaving for retirement. This has prompted pension providers to call for further pension reform.
Could the following be one of those reforms?
We often hear stories about private member bills suggesting pension reforms of one kind or another. But if such a bill gains government backing, then it becomes much more significant.
The DWP has backed Conservative MP Jonathan Gullis’ Private Member’s Bill incorporating plans to expand auto-enrolment (AE).
The bill, which was published on 2 March and passed the second reading stage last week, seeks two extensions to AE, abolishing the lower earnings limit for contributions and reducing the age for being automatically enrolled to 18.
I would say that this changes the shape of AE significantly though it is not, of course, a panacea in terms of undersaving.
It will be interesting to hear industry views on practicalities and indeed affordability of contributions and on the potential means-testing of various benefits among the poorest retirees. It is, potentially, a significant reset and makes the UK look and feel more more like some comprehensive systems around the world.
The final pension development is the news that the dashboard has been delayed again.
As the FT reported, pensions minister Laura Trott announced on Thursday that the government would undertake a “reset of the pension dashboards programme (PDP)”, adding that the project had been a complex undertaking and a new chair would soon be appointed to develop a delivery plan.
It would be great to hear some adviser views which I often think are missing from the overall debate on pensions, savings and investing.
Of course, another significant public policy debate, that can often sit alongside general pension concerns is the advice gap and the following story falls into that category.
Vanguard had entered the advice market with some fanfare but has now withdrawn less than two years after launch.
We are told the average age of the client for this service was 38 years old. However, this is quite an interesting line in one report presumably from inside Vanguard - Money Marketing understands that Vanguard was expecting an older customer profile.
There has been a lot of social media debate regarding this story including a slightly silly discussion about whether advisers were happy or sad, the difficulty of providing advice that isn't full service, whether it was ever a competitive threat and whether or not big players are essential to close the advice gap or not. Debate and discuss!
There was another development in an unfortunate saga. The recently formed Association of Pension Transfer Specialists (APTS) wants to join an Upper Tribunal case to review the FCA’s redress scheme for steelworkers. The APTS is disputing the basis for some FCA calculations
Veterans among readers may remember that some of the disputes in the early 2000s pension review centred on how redress was calculated and a Treasury select committee intervention brought significant change which did favour IFAs to a degree. Some might say there is nothing new under the sun or certainly not when it comes to financial services disputes.
Finally, I thought this was an interesting splash in the FT on Saturday – sources inside the government – one presumes the Treasury and at ARM – are blaming the FCA for the firm’s decision not to plump for a dual listing in New York and London.
The implication is that the FCA got in the way. There is clearly a tension between unnecessary paperwork and delay and maintaining standards as a listings centre and I am not sure that trade off is properly considered here. ARM parent Softbank also appears to be blaming political uncertainty and lack of a national semiconductor strategy.
There are multitude of issues here, but it is important to keep an eye on the City’s fortunes in terms of the public finances but maybe also for IFAs based in London and the south east.