What are the challenges and top priorities for the new Pensions Minister? Experts lay out the most pressing issues
- Richard Harrington is appointed new Pensions Minister
- He replaces Baroness Ros Altmann, who quit last Friday
As the Government has appointed Richard Harrington as the new Pensions Minister, industry experts have expressed their views on what his priorities should be.
Harrington replaces Baroness Ros Altmann, who quit last Friday and who has campaigned on behalf of pensioners throughout her working life.
Richard Parkin, head of Pensions at Fidelity International said the new government has got a lot on its plate at the moment.
Pension challenge: Richard Harrington, left, replaces Ros Altmann, who quit last Friday as Pensions Minister
'We do think there’s scope to slow down on some things, most notably the Lifetime ISA, but we have to ensure automatic enrolment is seen through,' he said.
'Getting people into a pension plan is the first hurdle to delivering good retirement outcomes. Fall here and we stand no chance of achieving our goals.'
Parkin also said the government should 'think long and hard' before reopening the debate on tax-relief.
'It is probably a debate that needs to be had but we need to approach the challenge in a structured and thoughtful way unless we want to create even more uncertainty for pension savers,' he added.
Below are what Fidelity believes are the six key priority areas.
1. Stick with automatic enrolment
The roll out of auto-enrolment will continue for the next couple of years and so far it’s been a success, but we still need to get some of the smallest employers on board and raise the minimum contributions to the 8 per cent target. Many have complained that these minimums are not enough and they’re right but the focus has to be on getting people enrolled.
Government should continue to promote workplace pension saving and a revival of the 'We’re all in' slogan may be very much in keeping with the new prime minister’s vision for the country.
2. Help people make retirement decisions
Pension freedom has been hugely popular with consumers, but more needs to be done to help people make the right choices with their retirement savings. The outgoing Pensions Minister was right to suggest that people need to be engaged in retirement planning long before they come to access their savings.
Looking at how providers communicate with customers in the run up to age 55 is key. The work on implementing the Financial Advice Market Review and consolidating public guidance into a single entity are important steps in getting more support to more people when they need it most.
3. Tell LISA you’ll see her later?
The Lifetime ISA is likely to be highly popular with consumers but work between industry and the government on how the new product operates suggests a longer lead time for its introduction may be advisable. In particular, most believe the government top-up should be paid monthly rather than annually but this will take more development time for HMRC and product providers.
Might it be better to get the product right first time than try and rush a launch in April 2017? We suspect Treasury officials will have plenty more to keep them occupied. Similar thoughts might apply to the secondary annuity market that still needs a lot of work before it’s ready to go live.
Auto-enrolment: Government should continue to promote workplace pension saving, Fidelity said
4. Don't rush into more pension tax changes
The pensions industry is buzzing with suggestions that post-referendum economic challenges might put pension tax-relief reform back on the agenda. Further limitations on higher-rate tax relief also play well to the new political tone. While this is certainly unfinished business we hope that government will do a lot more thinking around the approach and possible consequences before doing anything.
The net result of the last consultation was a lot of unnecessary panic amongst consumers that probably ended up costing the government even more in tax-relief payments than it would have done had they stayed schtum.
5. Press on with the Pensions Dashboard
The pensions industry is making good progress in developing a pensions dashboard. The government role here is largely one of cheerleader so we’d hope that they continue to support the development providing a steer where necessary.
6. Managing great expectations - the State Pension won't be enough
The consolidation of State Pensions and the move to defined contribution in the UK is a clear shift in responsibility for retirement from State to individual, which is well understood by pensions people but doesn’t feel like it’s fully sunk in to the UK psyche.
The flat-rate State Pension finally allows us to be (reasonably) clear as to what people can expect from the State. While it may not seem politically expedient, government needs to speak open and frankly to the public to ensure they know that’s all they’ll get if they don’t save more themselves. This understanding will be the first step in really getting people engaged in retirement saving.