Delays and uncertainty for pensions as election called

The Pensions and Lifetime Savings Association laments the setbacks to important government policies caused by the dissolution of parliament ahead of the election.

Like nearly everyone else, we at the PLSA were assuming the general election would be in the autumn, which would leave time for the government to take decisive action on a wide range of ‘in flight’ pension initiatives.

But the prime minister’s recent shock announcement to hold an election on 4 July has changed all that.

With just days remaining before the dissolution of parliament, important policy and regulatory initiatives have been left in suspension, leading to delays and uncertainty for schemes in several key areas.

Consolidation and funding

One of the most significant of these delays concerns the Department for Work and Pensions’ (DWP) view on its recent defined benefit (DB) surplus and public sector consolidator consultations.

Policy development was still at an early stage, and while real progress would have required a Pensions Bill, for which there was no time, we had hoped the DWP would set out its thinking for the future, which might have acted as a basis for a new government in the autumn.

We now don’t expect there to be any progress in this area until 2025 at the earliest.

We are also waiting for the DB Funding Code, which was expected to be published this summer and apply to schemes with valuations after October.

While a short delay is not likely to have a major impact, the Pensions Regulator (TPR) should take the opportunity to consider the implementation timetable for the code – ideally moving implementation to the end of the year or spring 2025 to provide schemes and employers with more time to prepare.

Lifetime allowances and lifetime providers

HM Revenue & Customs (HMRC) was due to introduce tax changes to fix issues with the regulations surrounding the lifetime allowance. But with just days until parliament dissolves on 30 May, it is unlikely we will see these changes made – meaning savers, pension schemes and the wider financial planning sector will face significant problems.

It could mean savers being financially penalised and schemes operating in legislative grey areas. It is crucial for HMRC to provide clarity soon. Labour’s stated policy to alter the recent changes adds further uncertainty.

We’re also waiting on the response from the DWP’s call for evidence on the lifetime provider model, which caused a lot of debate earlier this year. More immediately, the important ongoing work on default consolidators will likely be paused.

Given the importance of a small pots solution we hope government will pick this up again as a priority in the new parliament.

A consultation document on value for money was expected but is also now likely to be delayed. It is crucial to get this right. The benefit of a delay means there is a chance to unify the proposals from the Financial Conduct Authority, the DWP and TPR so that they work across the entire sector – contract, trust and retail.

The first 100 days

It is essential for the new government, whoever that may be, to provide clarity and guidance to mitigate these disruptions within the first 100 days of being formed.

But, of course, a new government also creates an opportunity to re-prioritise pensions policy and to introduce overdue reforms to get people saving more so that in the future more people can enjoy a good retirement.

We have identified five key areas of the UK pensions system where we would like a new government to act quickly, within the first 100 days, to better secure the financial futures of millions of savers.

The PLSA has outlined specific actions for the incoming government to address in the following areas: