Time for a summer stocktake
19 September 2019
By Julian Mund, Chief Executive of the PLSA.
Summer has been a good time for all of us to reflect on the year so far. With holiday season here we can enjoy the sun (if it’s the sun we seek), while looking back at the lessons (and hopefully successes) we can learn from in the first half of the year and look ahead at the challenges we can expect towards the end of 2019.
There have been some exciting developments taking place so far this year. The Master Trust authorisation regime went live and the Cost Transparency Initiative was launched in April. Add to that, auto-enrolment figures passing the 10 million mark and it’s been a pretty hectic first half of 2019.
If that wasn’t enough, we’ve also had a decision on the Pensions Dashboard agreed by Government. This is an important initiative which has the potential to help savers plan their retirement income but it will also present a challenge to the pensions sector, especially, for smaller schemes with less sophisticated IT and for DB schemes, where there is a risk that new data will be required. But aside from all this progress, there has been a certain amount of uncertainty in the air.
Politically and professionally, it’s also been all change. We have seen the introduction of the Money and Pensions Service (MAPS) who will deliver greater pensions guidance and a change in leadership at The Pensions Regulator (TPR). Add to that, nationally you can’t hide from the fact that we’re on our second Prime Minister and our second Chancellor.
And the political upheaval may not end there. There is the potential that a General Election may be called which could further delay ongoing national projects. In addition to this, a new Labour government – should they win the potential election – could implement plans for the nationalisation of numerous utilities which would have wide-reaching implications for the pensions industry as institutional investors. This is all food for thought.
Despite all the uncertainty there is still plenty of work that must be moved forward. It almost goes without saying that Brexit will be grabbing the attention. However, there are other domestic issues that still need to be thoroughly ironed out at both a national and industry level.
The Pensions Bill was expected this summer but, to date, remains unpublished. It’s therefore vital this has to be a priority for the reappointed Pensions Minister, Guy Opperman, as it includes a number of important measures including requirements to connect to the Pensions Dashboard, a new authorisaiton and regulatory regime for DB Superfunds as well as a new powers for TPR regarding the DB funding regime.
Our Retirement Living Standards will be published in October at our Annual Conference in Manchester. Pitched at three levels – minimum, moderate and comfortable – the Retirement Living Standards will help people to get a better understanding of the amount they will need for their retirement for different kinds of lifestyle. We are working with Government to show how valuable these standards are in helping people understand their retirement needs and we hope it will incorporate them in the pensions dashboard.
PLSA research shows that at a contribution rate of 8%, the majority of savers are unlikely to meet the Pension Commission’s Target Replacement Rate. In our Hitting the Target report, we proposed the next Government legislate for a gradual increase in automatic enrolment contributions to 12% of salary by 2030 and moved to a 50/50 employer/saver split. In this Brexit world, politically this might be hard to deliver, but it is important that Mr Johnson and his Government focus now on how to ensure people are saving enough so everyone can enjoy as prosperous a retirement as possible.
There are also a host of emerging issues coming to the fore in 2019 and beyond. It’s hard to escape reference to the impact of climate change and the pressures of it remain firmly on the agenda with pensions; evidenced by the protestors at our Local Authority Conference in May as well as forthcoming Government guidelines on Environment, Social and Governance (ESG) factors.
The role of trustees is firmly in the regulator’s eyesight too, as they begin an in-depth consultation about their role and duties. Cost transparency is high on the agenda as well, not just from the Cost Transparency Initiative, but from the Work and Pensions Select Committee who will be looking at it, as well as the Labour Party proposing to focus on pension costs if elected.
At an industry level the PLSA will be hosting our ever-popular Annual Conference in Manchester in October – looking at what makes world class systems.
The policy side won’t be taking its foot off the pedal either. With TPR consulting on the funding regime and ESG guidelines coming into force in October, the tail end of 2019 looks like it will be keeping everyone on their toes.
This article first appeared in Pensions Expert.