Time running out for DWP to book 2019 bills, Webb warns
The Department for Work and Pensions is at risk of running out of time to pass key aspects of its pensions policy agenda in 2019 due to the impact of Brexit and several measures yet to even reach a consultation stage, according to former pensions minister Sir Steve Webb.
Now director of policy at pension and investment provider Royal London, Webb said reforms that could be dropped include some of those mooted in the defined benefit white paper and essential upgrades to auto-enrolment.
Major pensions bills usually progress for consideration by parliament after being announced in the Queen’s speech in June.
The 2018 speech was cancelled last year to give Parliament more time to hash out the details of Brexit, and as a result there is likely to be intense competition over next year’s legislative agenda amongst attention-starved government departments, according to Webb.
The real priorities for such a bill should be getting people saving more than 8 per cent and helping nearly five million self-employed people save for a pension
The “DWP are by no means guaranteed a bill in the 2019/20 Queen’s speech; even if they get one, it will not necessarily include everything they want”, he said.
For bills to win the approval of prime minister Theresa May, who lacks a Commons majority, Webb said they will have to fulfil five criteria; prospective laws should be essential, popular, uncontroversial, quick to implement and already near to being complete.
It is this final test of readiness that could undo some of pensions and financial inclusion minister Guy Opperman’s promised reforms. His department is yet to consult on any of the measures floated in the government’s white paper on DB pensions, such as a revised funding regime and promoting consolidation.
Fines look to be a priority
Some elements of the paper look set to be included already. For example, levying fines against employers found to be willfully or recklessly negligent in relation to underfunding a DB scheme stems more or less from May’s manifesto promise to protect pensions from irresponsible bosses.
Webb also predicted that the implementation of the auto-enrolment review would be towards the top of the department’s shopping list, but hoped that more extensive reforms would also be considered.
“The real priorities for such a bill should be getting people saving more than 8 per cent and helping nearly five million self-employed people save for a pension, plus putting in place the foundations for the pensions dashboard,” said Webb.
“Unfortunately, they may instead focus on gesture measures relating to DB funding, responding largely to previous negative newspaper headlines, and relatively minor changes to auto-enrolment,” he added.
A spokesperson for the DWP said: “We are committed to passing the legislation necessary to ensure that the pension system in this country works for everyone and will seek to legislate at the earliest opportunity.”
Industry unconvinced by criminal measures
In a scenario where the department is forced to cherry-pick its bills, political pressure is backing the government’s plans to press ahead with criminal sanctions against DB employers.
The Work and Pensions Committee has previously called for “nuclear” fines to be levied, and in a committee hearing on Wednesday chair Frank Field reiterated his desire to “put the fear of god into some of those people who currently seem to know no shame whatsoever about their behaviour”.
The industry, however, is less taken with the idea, and appears to share Webb’s doubts about the predicted prioritisation of fines over other measures.
Bob Scott, senior partner at consultancy LCP and outgoing chair of the Association of Consulting Actuaries, told the committee hearing that fines were unlikely to have a significant impact.
“Company directors are already potentially liable to a large number of criminal sanctions under the Companies Acts, and despite those there’s still been gross failures in corporate governance,” he said.
Seeking members' ethical views could muddy DB waters, experts say
The Environmental Audit Committee has proposed a requirement for schemes to actively seek the views of members when producing a statement of investment principles, a move experts say could complicate matters for defined benefit trustees.
“Adding a specific offence in relation to the pension scheme may not deter those who ride roughshod over their obligations anyway,” he continued.
That view found support from Baroness Drake, a Labour peer who also faced the committee on Wednesday.
“There’s a limit to what the Pensions Regulator can do where the driver for the pensions problem is a much bigger corporate governance problem,” she said, adding that the committee should be careful not to castigate the regulator over issues “outside their remit”.