Pension pot-for-life
Our main concern is that this is being rushed out the door. Far greater consideration and consultation with industry is needed to ensure that no saver in Britain is left behind if pot-for-life is introduced. This would represent a seismic change to auto enrolment and pensions more widely. Whilst consumer choice is in principle a very good thing, there is a real risk that consumers could be attracted by savvy consumer marketing and drawn away from workplace schemes that offer lower costs and strong oversight, including well-governed and good quality (default) investment solutions which deliver better value for members. Genuine consumer choice will only be achieved if the government is able to deliver the other much-needed initiatives it has promised: the expansion of auto enrolment, increased contributions and the Pensions Dashboard. These are all successful forerunners to a pot-for-life system.
Pension fund disclosure of UK and overseas investment
We fully support the government’s introduction of mandatory reporting on pension fund charges, investment returns, and performance. We welcome the transparency this would bring to help to further demystify pension savings and investments and allow employers to make more meaningful comparisons and choices over which workplace pension scheme they should put in place for their employees.
We welcome transparency around how much pension funds are investing in the UK versus overseas, and we support the government’s ambition to encourage investment into the UK. However, the sole focus must firmly remain on securing better outcomes for long-term savers. Trustees and providers need to work on the best investment strategy for savers and this is something that changes depending on market conditions. It would be a mistake to go any further than today’s reporting reforms and be overly prescriptive on investment geography. Pension scheme trustees are already balancing the need to deliver good saver returns, whilst ensuring savers don’t take on too much risk. Many pension schemes are now opting to invest in line with their own pathways to net zero, which means the focus is on decarbonisation opportunities as opposed to geographical investment allocations. Whilst we cannot speak on behalf of the trustee population, we would expect trustees to already be considering UK investment where all these things can be delivered.
Reform of auto enrolment
We were very disappointed not to see a set timetable for the expansion of auto enrolment and a clear plan for increasing pension contributions. The recent priorities of the government do not address the most fundamental issue: savers aren’t saving enough. Whilst we appreciate the desire of the government to keep this budget focused on purely good news in the form of cost cutting for individuals and employers, now should have been the time to act and get the clock counting down to auto enrolment reform, so we can allow for greater savings and better retirements. Employers also need a fair warning and a better understanding of the government’s timetable.
Hidden under the current average UK retirement savings figures is an increasingly polarised and unequal picture of savings. Expanding auto enrolment, to benefit part-time and younger workers as well as low-paid and multi-job holders, and increasing mandated pension contributions to a sustainable level, would take a big step towards tackling this inequality and stop the creation of another generation of Haves and Have-nots in retirement.
New British ISA and LISA reform
We’re very supportive of incentives to encourage UK savers to invest in the British economy through the new British ISA. We would have welcomed and supported changes to LISAs which were proposed to remove the penalty that has hit a number of first time buyers. LISAs have served as an initial introduction to longer-term saving, but too many young savers have lost their hard earned cash when withdrawing money, which has damaged trust in long-term savings products. LISAs and wider policies on longer-term savings, particularly for younger generations struggling to save for a house and put money away for retirement, need more joined-up thinking from the government. An independent pensions and savings commission, with cross-party support, would be the best way to tackle this in the UK.
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