Hymans Robertson's Wish List for Amber Rudd as Secretary of State for Work and Pensions
25 Jul 2019
Now that Amber Rudd is staying in her role as Secretary of State for Work and Pensions, experts from Hymans Robertson, the leading pensions and risk consultancy, have outlined their hopes for what should be at the top of the agenda for her, and whoever is appointed to the role of Pension Minister.
Susan McIlvogue, Head of DB Pensions, says:
“I would really like the Secretary of State to quickly push through the eagerly awaited Pensions Bill. It has been delayed for months and anything further will add uncertainty and create a planning blight. Within this context I’d love to see them continue to encourage DB schemes to consider various forms of consolidation as a potential way to create value and improve benefit security. I’d also like them to consider ways to enable wider benefit simplification. Complicated benefits can increase costs – including buyout costs – and can act as a perceived barrier to trustees moving advisers to create value.”
Rona Train, Partner and DC expert, says:
“It will be really important for Amber Rudd as Secretary of State as well as the Pensions Minister to support the adoption of the clear targets that the PLSA is proposing. Only through this type of guidance will the majority of people have a chance of saving enough to provide an adequate income in retirement.
“There must also be a simplification of the Annual Allowance and Lifetime Allowance (as well as MPAA, which is hitting many unintended members). The taper is a huge disincentive for pension saving for high earners and their employers who are being paralysed by the complexity of the system. Changing the allowances might also lead to senior management being more engaged in their company pensions schemes. Currently, many can no longer contribute to their schemes because of the allowances and their interest in the scheme and its ongoing governance has waned. Members would ultimately benefit from them taking more interest.
“I also hope that Amber Rudd, along with the DWP more widely, listens more to industry practitioners and less to lobby groups when developing pensions policy!”
Calum Cooper, Partner, says:
“I’d love to see Amber Rudd fully committed to a clear long-term vision and measurable goals that transcend any one government. Pensions policy has for so long been short-term but it would be great to see the UK aim to be, for example, amongst the top 5 retirement systems in the world by 2030 (currently we are no. 15 according to Australian Centre for Financial Studies). We know and advocate the benefit to pensioners of from having clear long-term goals and believe that our pensions system would benefit from this too.
“It is also vital that the Secretary of State commits to better aligning policy on social care and pensions. They are two parts of a common puzzle: how to maintain financial independence and a decent quality of life after work. It would be magical if Government develop integrated later life policy. Policy that is sustainable and helps citizens to plan their later life finances well in advance and easily. With increasing longevity, but not necessarily healthy longevity, the latter is becoming a growing crisis. It is often not planned for as it’s seen as too difficult. Almost like a ‘retirement phase 2’ that they will try and navigate later. By which point it’s too late.”
Michael Ambery, Senior DC Consultant, says:
“We need the Government to have a clear focus on income in retirement to avoid social strain and the ticking time bomb of inadequate income in retirement that is set to blow up in a decade or two’s time. It is great to see that auto enrolment has encouraged more employers to help more people save for their retirement, but the job is far from done. In reality, with more employers providing AE pensions, many savers will be believing that the pension contributions they are making will provide them with a comfortable income in retirement, yet that will not be the case.
“Even with the recent increases in contribution levels to 8% the truth is that many people will be massively under-saving for a comfortable retirement. If the contribution was increased to 12% and the self-employed were also brought into AE, we would begin to see a contribution that will have a meaningful impact for people’s retirement savings. At that level we can see far greater certainty of them reaching a target income that they can live on in retirement.
“Ensuring people save enough for an adequate income in retirement could also be helped by the government throwing its support behind the PLSA’s targets for retirement income that are due to be published later this year and enthusiasm for tooling via the proposed dashboard. It may also need a more wholesale review of state pension and guaranteed minimums to have any impact. The Government has access to the tools and I personally believe the Government will address this challenge alongside others.”
Matt Davis, Head of GMP equalisation:
“It’s vital that Amber Rudd, as Secretary of State, and the Pensions Minister provide clarity on tax treatment for GMP equalisation. Modest earners have been unable to convert pension into small cash sums due to tax uncertainty leaving them missing out. There is a need for the government to address this quickly.”