‘Two-stage pensions review offers potential for faster implementation of pro-growth pension reforms’ – Steve Webb

With the first meeting today (Monday 22nd) of the Pensions Review promised in the Labour party manifesto, the government has revealed details which suggest the potential for faster implementation of ‘pro-growth’ reforms to pensions.

Commenting on the review, new Pensions Minister Emma Reynolds, whose role is based in both HM Treasury and DWP, said:

“Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.”

Until now it had seemed that the Pension Scheme Bill included in the King’s Speech would include only a narrow range of measures such as the creation of a Value For Money (VFM) framework to drive DC consolidation, measures on consolidating micro pension pots, a legal framework for Superfunds and new duties on pension scheme trustees to look after members after retirement.

But the Government is now suggesting that if the Pension Review decides that further measures could be introduced to ‘drive investment’, these could also be included in this Pension Schemes Bill rather than waiting at least 12 months for another Bill in another King’s Speech.

Measures likely to receive particular focus could include:

• The use of the Pension Protection Fund as a ‘public sector consolidator’, bringing together potentially thousands of smaller DB schemes and others deemed unattractive to the private insurance market; the idea is that the PPF would be able to invest for the long-term and in assets which may not be open to small, mature pension schemes;
• The potential to encourage Defined Benefit pension schemes to ‘run on’ rather than move to immediate de-risking with an insurer, including measures to allow sponsors to extract surplus from the best funded schemes; this could have multiple attractions to the government, including slowing the sale of gilts (as schemes move to buyout), sustaining productive investment for longer and generating surplus cash to benefit corporate sponsors, DB members and potentially the DC generation.

Commenting, Steve Webb, partner at LCP and former pensions minister said:

“The limited measures listed in the King’s Speech for the forthcoming Pension Schemes Bill had seemed to suggest that the new Government’s own agenda would be on a slow track to implementation, potentially awaiting future legislation in a future King’s Speech. But by operating a two-stage pensions review, with an early hunt for measures which could be added in to the current Bill, the Government has the potential for faster implementation of measures which it believes would promote the ‘productive’ use of pension scheme finances. As a result, we are likely to see significant legislative changes across the pensions landscape in the next 12 months.”