Earlier this year I wrote that pensions were becoming a major political issue (see the following link for details http://goo.gl/LcxE2j), yet even I was not expecting the subject to take centre stage in The Chancellor’s Budget speech last week.
And on the subject of things I was not expecting, I can most certainly add the package of pension reforms that George Osborne announced.* This is huge, and a game changer for pensions in the UK. I don’t usually like to use the adjective “exciting” when writing on the subject of pensions, but it is actually appropriate in this instance.
For many years the industry has struggled to make pensions more attractive to savers and employers within the incredibly tight limitations that legislation prescribed. And now, in one hit, those restrictions have been largely removed. Once the dust has settled there is bound to be innovation aplenty – and that can only benefit consumers.
From the employee benefits perspective there is now the tantalising prospect of bespoke pension offerings for employers designed to best meet the needs of the employer and their specific workforce demographic. That would be real progress.
So a lot to look forward to. Yet we are still a little way off such change. Some transitional changes take effect this week, but the major shift will not take place until April 2015, and even then is subject to a formal Consultation and Legislation** being passed. Jelf Employee Benefits (JEB) are working on a technical update on these changes which we hope to issue early this week to all our clients. I will update the blog with the link once we have this.
The announcements made this week also raise some interesting questions for other industry initiatives. Operation “big fat pension pot” (the idea of auto-transferring small pensions into one bigger pot) and Defined Ambition schemes (a Defined Contribution scheme with some guarantees built in) may both need to be revisited to see how relevant they are in the new pensions landscape. These subjects (and others no doubt) will appear often on this blog in the future.
In the meantime, we still have the more pressing issue of Auto-Enrolment duties hanging over the heads of many employers. News-feeds have suggested that the long awaited announcement on the Auto-Enrolment charges cap will be made in the coming week, and I will of course be commenting on this as soon as it is known.
* and no one else I know of in the industry was expecting this either!
** it has been reported this weekend that the Labour party currently appear to be endorsing the pension proposals made by the Coalition – so it is unlikely that any major change of direction will be made before the proposals are enacted