Lord Stoneham: Flat rate tax relief will help 'people in the middle'

Does the Pensions Regulator need stronger powers?

We think the Conservatives will end up being a bit spineless actually on the regulator. We are very supportive of various measures against the type of person trying to shuffle off difficult pension schemes by disposing of them, and we therefore think the regulator should have a much closer role on stopping that sort of thing.

Would that be oversight on M&A?

Exactly. We think that the country as a whole probably has been just a little too friendly to mergers and takeovers.

We should perhaps go a little further in terms of the obligations we put on trustees, to examine whether the members would get greater value in a bigger scheme

What about employers struggling to afford their promises?

We do think people have made a contractual commitment, so it should not be too easy for people just to, when they feel like it, change the terms of the pension scheme. Obviously when a scheme is under stress and the consequences are far worse unless a change is made, then we are sympathetic and the regulator should intervene and approve it.

Would insolvency have to be imminent within 12 months?

I think that is about right. If it is that imminent there is obviously a great deal of stress there.

We would also look, as part of a review, as to whether we should put an onus on trustees to demonstrate that they are running sufficiently large schemes. They do have that in Australia, and we think that the regulator should have a role in trying to encourage it.

We should eliminate from our minds the thought that there’s huge amounts of tax revenue benefit, certainly in the short term

It also should advise on whether we should perhaps go a little further in terms of the obligations we put on trustees, to examine whether the members would get greater value in a bigger scheme. The lack of that consolidation is probably costing savers return.

You have promised to introduce a flat rate of tax relief above the basic rate. Why is this not the money-grab that critics saw in George Osborne’s plans on this?

The very wealthy can probably look after themselves as far as their pension is concerned, the very poor rely on benefits and the state pension, but it is the people in the middle, that is where we think the focus should be.

We would prefer to have a scheme that, instead of talking about tax relief, talks about, ‘For every two or three pounds you put into your pension scheme, you get a pound from the state’.

There should be some sort of annual cap for that, to make sure that it is not the rich and the wealthy who get all the benefits of the system. We do think we should be looking for some sort of consensus across parties, which would enable a reform to stick and be stable. It is extremely damaging the way the pension cap has constantly been altered.

Would you end the lifetime allowance?

We do not like the lifetime cap. It removes any incentive for the higher earners to provide for pensions. If you take them out of the pension frame you lose all that interest and commitment, and as we have seen company directors just end up giving pretty paltry, basic pension schemes.

What improvements are needed in auto-enrolment?

Obviously it does not deal with the self-employed problem. We have no easy answers there, but that needs addressing. We have also got to find a way of gradually improving the rates at which people are saving into these schemes.

We tried in the coalition to get consolidation of pots instituted into the scheme, so that unless you opted out, your pot would follow you in your job. Two years on there is no sign of the government doing anything.

It is often the people in the lowest-paying areas who are moving jobs quite a lot. The lack of that consolidation is dangerous in the sense that they may lose track of them. Secondly, they are probably not getting value for money if they are in lots of small funds. We need to move more on the dashboard concept, so that people know exactly what their pensions are going to be.