In a moment we’ll get on to Mansion House speeches, and some moderately hefty pension policy action.
Before that, sad news this week of the passing of Nick Hungerford at the shockingly young age of 43. Nick was a visionary entrepreneur who through his firm Nutmeg pioneered mass market robo advice. The world needs people like Nick and his passing is a sad loss to all who knew him but most especially to his wife and young daughter.
Back to Jeremy ‘Del Boy’ Hunt, who confidently predicted we’ll all be richer, if not this time next year, then certainly in retirement, thanks to his cunning plan to get our pensions invested in private equity fizzyness. Yes, well, maybe. It’s easy to deride his bold statement that everyone ‘will’ be £1,000 better off in retirement thanks to his genius idea of investing our retirement savings in assets at which trustees have hitherto turned up their noses. See, I just did.
That wasn’t the interesting stuff though. Away from the Mansion House Reforms there was a blizzard of policy papers on (and at this point, ordinarily I’d resort to a bullet-point list but TCWU is altogether way too classy for bullet points) Value for Money in occupational DC schemes; decumulation from DC pension schemes; Collective Defined Contribution schemes; Consolidation of small pension pots; Trustee skills and culture; not to mention plans to consolidate DB schemes too.
There was more: the Treasury also published papers on retail disclosures and the abolition of all PRIIPS-related disclosures, to be replaced by new UK-specific regime; something which would ordinarily be worth a TCWU in its own right but these are heady days. Expect draft legislation ‘by 2024’. We also had research findings on investment pathways (mostly doing what they are supposed to) and a promise we’ll see findings on the retirement income advice thematic review ‘around the end of 2023’.
There were essentially two recurring themes running through the government policy papers today and an interesting trailer for what’s next for auto-enrolment.
The first theme was the headline stuff around investing in private equity, illiquid assets and infrastructure. The government really, really wants some of that sweet £2.5 trillion the pensions industry is hoarding, Smaug-like, idling slumbering on its mountain of loot when all that money could be helping the economy, boosting jobs, growth and votes.
The other theme was tighter standards, accountability and consolidation. Again and again across the policy papers was the recurring message of fewer, bigger, better-run schemes. There were too, repeated nods across to the FCA: these reforms may have been primarily directed at the trust-based occupational sector but it is wildly improbable they won’t leach across into contract-based pensions such as SIPPs and GPPs. Once upon a time the FCA and TPR barely acknowledged each other’s existence, let alone spoke to each other. These days, the regulatory entente cordiale glows warmer than a Parisian dustbin during the riot season and over in contract-based pension land we should take heed. This theme of tighter standards, accountability, consolidation, and fewer bigger pension providers is very much a thing of which we should be mindful.
There was also an intriguing hint of where the government wants to go next with auto-enrolment. In the paper on consolidating small pots they make clear their preferred direction of travel is to evolve our current auto-enrolment system into something more like the Aussie pensions world, where they have a thing called ‘stapling’. There they have stripped back the role of the employer to being simply a source of contributions; when you change jobs, your pension travels with you (hence stapling) and your new employer contributes to your existing pension. It is a good idea; I pitched it to Steve Webb back around 2013 but he wasn’t buying it then, so it is gratifying to see it come back round ten years later.
All this has a whiff of Schrödinger’s pension reform about it though for two reasons. Firstly, because the government is running out of road and some of these reforms will take years rather than months to implement: there simply isn’t time to get them all across the line ahead of the next election. The other reason is that the Labour Party, who let’s face it stand a more than reasonable chance of forming the next government, have as yet had nothing to say about all these issues. So, like the cat in the box, the reforms may or may not exist, depending on what happens at the election. If I were a betting man (and I’m not, not since that horse came home at 25-1) I’d guess Labour will largely support this direction of travel; in fact, they may go further. Back in the day, they never liked the idea of IGCs: just Trustee-lite, they said. If past performance is anything to go by, I’d expect them to double-down on these reforms.
Cheery stuff, all in all but what can you do? Whoever is driving the pension policy bus, it doesn’t travel very fast so there is time enough to buy a ticket and find your seat; don’t hang about too long though, it could be a bumpy road ahead. Look out for a webinar on all of this from me and the rest of the Regulatory and Public Affairs team in the next few weeks, there’s definitely a lot to talk about…
- If you want to see where Del Boy Hunt’s promise of bigger pensions came from, as well as a handy summary of the policy papers, this is the place to go.
- There are plans to scrap paper-based share certificates, which seems a good idea.
- Want a Digital Securities Sandbox? Then look no further.
- How about an Investment Research Review?
- Mike’s completed a quick delve into platform technology for FTAdviser here.
- The rumours are true, we won the Thought Leadership Work – Retail award at #IMAIA23 from Investment Week for House Rules. If you’d like to see what all the fuss is about, you can catch up with the paper here.
- For your soundtrack, here’s Alabama 3 and Hello…I’m Johnny Cash.
Thanks for reading.