Pension Schemes Bill ‘business as usual’ – Steve Webb, LCP

The measures contained in the Pension Schemes Bill just announced in the King’s Speech represent ‘business as usual’ for pensions policy, according to LCP Partner Steve Webb. 

Legislation in areas such as commercial superfunds or consolidation of ‘micro’ pension pots comes after years of consultation and discussion under the Conservative administration and would have been implemented by whichever party had won the election. Similarly, measures to drive out small, under-performing DC schemes through a ‘value-for-money’ framework had been under preparation before the election and are simply being carried forward by the new government.

One initiative that might have been expected in the new Pensions Bill but appears to be missing is legislation that allows the Pension Protection Fund (PPF) to act as a ‘public sector consolidator’ of small Defined Benefit pension schemes. However, it may simply be that the necessary legislation could not be prepared in time rather than that the new government has dropped this idea.

Commenting, Former Pensions Minister and LCP Partner Steve Webb said:

“This Pension Schemes Bill very much represents ‘business as usual’ when it comes to pensions policy. There appears to be nothing in the legislation that so far represents a distinctively ‘Labour party approach’ to pensions, and a Conservative minister could happily have brought forward this legislation. Perhaps inevitably, it will take time before we see how the new government’s agenda differs from that of its predecessor. But this does mean that any distinctive policies will have to await legislation later in this Parliament and may take time to have effect.”

On the subject of using ‘value for money’ measures to drive out under-performing schemes, Steve Webb added:

“Whilst the government understandably wants to drive out the smallest pension schemes, some of which may not be well run or deliver a good return, it is important to remember that the vast majority of people are not saving in small pension schemes. What matters to most savers is the performance of the largest schemes, including industry-wide Master Trusts, and the new VFM framework is unlikely to change much for those schemes, at least in the short-term.

“One area where the new government may need to take further action is the consolidation of small deferred pension pots. The measure included in the Pension Schemes Bill was designed to deal only with ‘micro’ pension pots under £1,000. But this will still leave millions of people with slightly larger pension pots which will remain fragmented and scattered across the pensions landscape. Unless the consolidation of micro pots is radically expanded, fresh policy thinking will be needed to tackle the issue of pension fragmentation.”