Pension data, pension protection and social care, key points from the Queen’s Speech
14 October 2019
Pension schemes will be compelled to provide data to pensions dashboards and new laws will protect individual’s pensions savings, while action around social care was promised as part of the new Pension Schemes Bill announced in the Queen’s Speech.
Addressing the House of Lords, Queen Elizabeth said: “To help people plan for the future measures will be brought forward to provide simpler oversight of pension savings. To protect people’s savings for later life, new laws will provide greater powers to tackle irresponsible management of private pension schemes.”
According to a briefing document, the new legislation will create a framework for the introduction of pensions dashboards, including provisions for regulators to ensure all relevant schemes comply.
The introduction of pensions dashboards will allow savers throughout the UK to easily access information from multiple pensions in one place online for the first time. The Department for Work and Pensions has estimated that the average person could have 11 jobs over a lifetime, building up multiple private pension pots.
Tom Selby, senior analyst, AJ Bell, welcomed the announcement: “The fact the reforms have been given the green light from Number 10 via the Pensions Bill means work developing and testing dashboards can now begin in earnest.
“Dashboards have the potential to revolutionise retirement engagement in the UK by allowing savers to see all their pensions in one place, but we need to recognise the first versions will be extremely limited.
“Schemes won’t be forced to provide data in the initial phase and total compulsion is expected to take years, meaning people will only see partial information. Ensuring the limitations of early dashboards are made crystal clear to users will be vital in establishing and maintaining trust.”
However, Chris Curry, principal director of the Pensions Dashboards Industry Delivery Group at MaPS, used the Speech to warn providers to prepare data for dashboards. He said: “[Compulsion] is a crucial next step towards the goal of delivering trusted dashboard services to help savers get information about all their pension pots in one online place of their choosing. As the details are worked out, it’s time for pension schemes, providers and their administrators to ensure they’re making plans for how their schemes will be ready to feed into the dashboards of the future.”
Steven Cameron, pensions director, Aegon, called on all political parties to support the Pensions Bill.
He said: “The aspect of the Pensions Bill of greatest and most wide importance is that concerning pension dashboards. This offers a huge opportunity to help millions of individuals better engage with their retirement planning, understanding if they are on track for the retirement they aspire to, and if not, to take action accordingly.
“For many their state pension is a significant proportion so while the Queen’s Speech did not refer to this, it is vital state pensions are also included in pension dashboards from day one.
“Pension providers and schemes, working with the Money and Pensions Service Delivery Group, are pressing ahead with many aspects of dashboard preparation, but legislation is needed to compel all pension schemes and providers to supply comprehensive data and state pension information must also be included.”
AJ Bell’s Selby said protecting members’ data to prevent scammers from accessing the system was of paramount importance and the government should be careful not to launch until security could be guaranteed. Selby said there were also “significant questions” around data standards, regulation and the presentation of information which will need to be addressed.
The Pensions Bill will also strengthen and enhance The Pensions Regulator’s powers and existing sanctions regime, so that it can “respond earlier when employers do not take their pension responsibilities seriously”. This includes taking tougher action against those who recklessly risk people’s pension benefits, in a bid to build greater consumer trust in pensions, the government said.
Selby noted: “The new deterrents include a criminal offence for bosses who demonstrate ‘wilful or grossly reckless behaviour’ in relation to defined benefit schemes.
“While the rhetoric here is tough, what constitutes ‘wilful or grossly reckless behaviour’ has not yet been spelled out. Ultimately it may be the courts that decide how this sanction is applied in the real world.”
In addition, the government will seek to provide a framework for the establishment, operation and regulation of collective defined contribution pensions.
Commenting on this development, Selby said: “Finally, the Pensions Bill proposes legislation which should eventually allow new ‘Collective Defined Contribution’ schemes to be introduced in the UK.
“Versions of these schemes, which sit somewhere between old-style defined benefit arrangements and more modern DC plans, have been introduced in other countries, to varying degrees of success.
“Communication will be absolutely key to ensuring people understand what they are getting into with CDC. While the scheme might target a certain level of pension, this will not be guaranteed, meaning members could see cuts in their benefits even after they have started drawing an income from the fund. Such benefit reductions were experienced in the Netherlands and sparked vociferous protests from those affected.”
Commenting on the Pensions Bill, Rachel Griffin, tax and financial planning expert, Quilter, said: “The speech finally delivered the long-awaited pension bill and along with it the necessary clarity on the pension dashboard and collective defined contribution schemes.
“However, there remain important issues, such as discrepancies around net pay schemes that were noticeably absent in the Queen’s Speech. This tax flaw means nearly two million low earners are being deprived of free pension cash. A new government should put fixing this quirk in this system high on their agenda.
“In fact the Office of Tax Simplification shed a harsh light on just these issues at the end of last week with a damning report on the complications within the pension system, including allowances, net pay and child benefit.
“The annual allowance in particular has garnered substantial attention recently as it is wreaking havoc across several public sector professions. The Government should be looking to scrap the taper altogether as this is quite clearly the root cause of the problem.”
The Queen’s Speech also addressed the issue of social care, which has long been called upon to provide greater clarity around funding, confirming that the government will bring forward proposals to reform the system.
The government acknowledged that care costs are both “unpredictable” and “very high”, making it difficult for people to prepare. A person aged 65 can expect to have care costs of around £40,000 on average over later life, while one in ten people will have care costs exceeding £100,000 before accommodation costs.
Cameron said: “This paves the way to addressing the current and growing crisis in social care provision and how it is funded. Our ageing population deserves clarity on what the state will pay for and what individuals will have to fund themselves, based on their wealth. For many, the key assurance they want is that they won’t have to use all of their lifetime savings or sell the family home to pay for social care should they need it.
“We hope to now see a long term commitment to provide adequate central Government funding to remove the current postcode lottery. And to avoid individuals using up all their hard earned savings on care, we also need a cap on the overall amount anyone will have to pay themselves, allowing people to plan ahead and protect inheritance aspirations.”
Griffin commented: “Pledges to resolve the issue have been two a penny, but an elusive green paper has yet to materialise. It appears that we have waited for so long that we are now going to bypass that stage altogether, with parties promising to deliver concrete proposals.
“One policy growing in popularity for both camps is free personal care. The impetus for this kind of policy makes sense and it seems straight forward. However, the government will need to be crystal clear to what is included within ‘free’ social care, as it is unlikely to include ‘hotel costs’ such as room and board.
“Whatever the policy, one of the central pillars of the government’s reform needs to be an awareness strategy.”
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