Pensions through a crystal ball
The benefit of hindsight is a wonderful thing. The benefits of a fully functional crystal ball to see the future would be much better. All pensions lawyers (and scheme actuaries) would add it to their gift list!
I will attempt to take a look at the pensions related announcements in Monday’s budget from a future (perhaps optimistic) vantage point.
So here we are, nearing the end of 2023…
Five years ago, in October 2018, Philip Hammond, Chancellor of the Exchequer, announced £5m support for the pensions dashboards (note the plural) project with the statement “The government is taking steps to support the launch of the Pensions Dashboards, innovative tools that will for the first time allow an individual to see their pension pots, including their State Pension, in one place….DWP will work closely with the pensions industry and financial technology firms.”
Many doubted that this would ever get off the ground – but yet I see myself in 2023, asking my smart-watch to show my latest pension figures – whilst my children laugh at the fact that I still find this a novelty.
2. Cold calling ban
Thankfully, in 2023 the blight of pension scams seems largely behind us, in part because of the announcement back in 2018 that the ban on cold calling to help protect pension fraud would soon be implemented, together with the issue of the consultation response. The concern at the time was: why was it taking so long? Statements around revisiting the statutory transfer legislation as “part of a suite of preventative measures” to protect members, and the government’s commitment to a public awareness campaign about the cold calling ban went almost under the radar.
Looking back, the way in which government and the pensions industry pulled together in the so-called “Superscam” awareness campaign was something that we can all be proud of – although we can never afford to be complacent in our battle against criminals.
One of the buzzwords back in 2018 was “transparency” in terms of pension fund investments and the charges associated with them. The concept of “patient capital” was still a new term for many in the industry. Was it something to do with the NHS? Apparently not. It is about being “patient” in the sense of long-term investments. The Chancellor saw DC pension schemes as having a “vital role to play in long-term financing for growth and innovation” and promised an FCA discussion paper and consultation.
Five years on – well – we are now seeing this take off (in a “patient” sort of way) and it is plain to see that DC investment patterns have certainly changed over the last five years with many schemes and providers now offering greater member choice around ESG and social impact investment funds. It is great to see the Millennials engaging so much with their scheme investments aided by advances in pentech.
It was also announced in the 2018 budget that from April 2020, tax paid “in good faith” by employees and customers to businesses going insolvent would go towards public services rather than funding “other creditors”. Any change that has the effect of less money being available for unsecured creditors (including pension schemes) is a matter of concern. (Our insolvency colleagues have issued a blog on this topic.)
The timing of this was always going to be interesting, with insolvency practitioners gearing up for busier times in the post-Brexit environment.
It is amazing that the gradual demise of RPI has not yet reached its conclusion in 2023, despite the Chancellor’s statement in 2018 that the government’s objective is to move more towards CPIH as its preferred measure of inflation, reducing the use of RPI when and where practicable.
As the evolution of policy in this area continues, determining the appropriate measure of benefit revaluation and escalation remains a live topic for pension schemes.
Rose coloured spectacles?
Of course the budget announcements are only the tip of the iceberg in terms of current pensions developments.
I hope that I am not looking at the world through rose-coloured spectacles in terms of the successes set out in 1-3 above. Time will tell!