2 Reviewing auto-enrolment and advising
on future pension policy
Case for a
new independent pension commission
12. Establishing a process for automatic enrolment
of employees in workplace pension schemes was a recommendation
of the 2005-06 Pensions Commission (the Turner Commission).[18]
Witnesses agreed that the success of AE was grounded in the political
consensus which the Commission was able to achieve, and from the
development of its recommendations with the full involvement of
stakeholders, based on an evidence-based approach, leading to
"a durable policy settlement from a broad political and stakeholder
consensus". Some witnesses were concerned that the 2014-15
pension reforms have not benefited from this same approach.[19]
13. The National Association of Pension Funds (NAPF)
contrasted the careful processes followed for introducing AE with
the way the current pension flexibilities were being introduced.
It called for the establishment of an "Independent Retirement
Savings Commission", accountable to the Secretary of State
and with a remit to define target retirement outcomes, recommend
policy change, and assess the impact of reforms.[20]
The People's Pension pointed out that the current reforms would
have implications for "decades to come" and was concerned
that the speed of change would lead to unintended consequences,
sub-optimal outcomes and the need for "further sticking-plaster
changes". It called for the establishment of an independent
Office of Pensions, to ensure that further policy is evidence-based,
and takes a long-term view.[21]
Morten Nilsson of NOW: Pensions believed that a new pension commission
could assess the dramatic changes which were taking place, particularly
as these would have long-term effects, which may not be obvious
at the moment. Standard Life supported these views.[22]
The International Longevity Centre UK also published a report
in February 2015 calling for a new independent pensions commission
to be set up, "to rebuild consensus-based policy making in
pensions and tackle the substantial challenge of insufficient
incomes in retirement".[23]
14. The Minister for Pensions (Rt Hon Steve Webb
MP) himself referred to the need to avoid "the curse of incrementalism:
a good-natured reform here, a well-meaning one there, but no sense
of direction". [24]
He agreed that the Turner Commission had been "a good thing
that did a lot of lasting good" and believed that "independent
input" was very valuable. He pointed out that legislation
was already in train to establish a body "to gather data
and to set out recommendations to Parliament on State Pension
age." However, his caveat on establishing a new commission
was that these bodies are not a "silver bullet" in developing
pensions policy because the decisions ultimately have to be made
by politicians.[25] However,
he was very keen that his "immediate successor" should
"look across the landscape" at an early stage, to assess
how all the recent pension reforms, including the new State Pension,
were fitting together. Any big gaps should be identified and a
five-year agenda set out for addressing them.[26]
15. An important ongoing issue which a new pension
commission could help to address is one we identified in our 2013
report: the lack of engagement of the general public in pension
saving and what could be termed the "asymmetry" of the
relationship between the pensions industry and savers in terms
of understanding the complex issues involved in pension saving.[27]
The Trades Union Congress (TUC) reinforced the point that the
pensions system "is not a functioning market in the way that
other consumer goods might be".[28]
Later in this report, we discuss measures necessary to protect
savers from detriment and to ensure that the benefits of retirement
saving are maximised for individuals (Chapter 6). Tackling the
imbalance in the relationship between the industry and savers
would be a significant step towards increasing protection for
savers, on which an independent pensions body would be well-placed
to advise.
Reviewing auto-enrolment
16. AE was due to be reviewed in 2017 in the limited
context of the restrictions placed on NEST when it was established.[29]
The decision on lifting these restrictions has now already been
made but witnesses were agreed that there was a strong case for
a wider review of AE. [30]
17. The Minister accepted that the 2017 NEST review,
although required in legislation, was "redundant". However,
he was very clear that AE should be reviewed and that this should
happen early in the new Parliament rather than waiting until 2017.
He believed that 2017 would be "too late" to start the
process because of the time needed to consult on any proposals
arising from a review, and then to legislate for and implement
the changes.[31]
18. We recommend that the next Government take
steps to establish an independent pension commission at an early
date after the General Election and certainly by July 2015. Its
remit should be: to review AE implementation to date; to advise
on necessary changes and adjustments to AE; to consider all the
implications of the pension flexibilities introduced from April
2015; and to advise government on consequent amendments required
to existing pension legislation, and on development of future
pension policy. The new commission should be similar in format
to the 2005-06 Pensions (Turner) Commission, with a chair and
two or three members only, but it should involve the widest range
of stakeholders in its deliberations, including the pensions industry,
employers, employees and their representatives, pension experts
and consumer representatives. It should coordinate its work with
the Government's planned independently-led review of State Pension
age. If the new Government does not accept that a new pension
commission is required, it will need to tackle the range of issues
raised in this report itself, as a matter of urgency.
18 The Pensions Commission published its First Report
in October 2004. This was followed by a Second Report in November
2005 and a Final Statement in April 2006. For more details see
the Pensions Commission website Back
19
See for example NEST Corporation (AEP0034) para 2.1; Standard
Life plc (AEP0012)
paras 11-12 Back
20
NAPF (AEP0031),
paras 14-15 Back
21
B&CE The People's Pension (AEP0020) pp 1-2 Back
22
Q111; Standard Life plc (AEP0012)
paras 11-12 Back
23
International Longevity Centre UK, Consensus revisited: the case for a new Pensions Commission,
February 2015 Back
24
Q269 Back
25
Qq246, 270-271 Back
26
Q269 Back
27
Sixth Report of Session 2012-13, Improving governance and best practice in workplace pensions,
HC 768, Summary and Chapters 2 and 5 Back
28
Q61 Back
29
For a description of the NEST restrictions and their impact, see
Fourth Report from the Work and Pensions Committee, Session 2012-13,
Lifting the Restrictions on NEST, HC 950. For a description
of the legislative steps to lift the restrictions, see Explanatory Memorandum to the National Employment Savings Trust (Amendment) Order 2015 No. 178 Back
30
Qq110-111 Back
31
Q269 Back
|
