Altmann quits as UK pension minister, calls for more reform

Added 18th July 2016

Ros Altmann has stepped down as UK pensions minister with a call for the new British government led by Theresa May to address some of the major policy reforms needed to ensure pensions meet the challenges facing retirees in the future.

Altmann quits as UK pension minister, calls for more reform

Ros Altmann

In a letter to the new prime minister, Altmann said that during her 15 months as minister of state for pensions she had sought to drive long-term positive changes on the pension front from within government and to try to ameliorate some of the past mistakes.

“Unfortunately over the past year, short-term political considerations, exacerbated by the EU referendum, have inhibited good policy-making,” she said.

Unchartered waters

“As the country heads into uncharted waters, I would urge you and your new team to enable my successor to address some of the major policy reforms that are needed to improve pensions for the future,” added Altmann, who formally resigned from the government on Friday.

The UK government has yet to name the specific responsibilities of the new team at the Department of Work and Pensions (DWP) but has confirmed it will be led by Damian Green as secretary of state. Green has formerly held junior ministerial posts at the Home Office and the Ministry of Justice.

The new DWP team also includes Damian Hinds as minister of state; Caroline Nokes as parliamentary under secretary of state and Richard Harrington also as parliamentary under secretary of state.

"Regardless of the economic challenges, everyone will need to have some money set aside for later life and pensions are the best way to do so."

Future plans

In her resignation letter Altmann urged prime minister May to enable her successor to address some of the major policy reforms that are needed to improve pensions for the future.

“It is vital that we continue to roll-out the successful auto-enrolment programme to ensure all employers offer pensions to their staff. Regardless of the economic challenges, everyone will need to have some money set aside for later life and pensions are the best way to do so.

“We must, too, address the crisis in social care funding and help people provide for potential care costs as well. In order to help fund this, we should look to develop a ‘one nation’ lifetime pension,” she said.

Flat rate tax

Altmann specifically called for the introduction of a flat rate for pension tax relief – a move that former chancellor George Osborne was due to introduce in the budget earlier this year.

“Our present ineffective and complex incentive structure for pension saving costs over £40bn ($53bn, €48bn) a year. It favours the highest earners disproportionately, while leaving lower earners seriously disadvantaged, “ Altmann said.

“We need a radical overhaul of incentives, which can offer more generous help than basic rate tax relief, but as a straightforward government pension contribution for all, and would end the discrimination against Britain’s lowest earners who are forced to pay at least 20% more for their pension than higher paid workers." she said.

Defined benefit reform

Altmann who has over 40 year's experience in the pensions industry, also called on the new government to conduct a major review of defined benefit pension schemes.

“We must urgently assess the future of our defined benefit pension schemes. Given the risks of diverting corporate resources to one favoured group of workers, the need to ensure adequate resources for younger generations’ pensions."

Industry reaction

Altmann’s call for further reforms was echoed by several industry participants.

Steven Cameron, pensions director at Aegon said: "Ros brought a refreshing and long term perspective to the Government's pension policy and we hope she will continue to campaign actively for sound pension policy in future.

“With such radical change in Government including those who will be responsible for pension policy and with Brexit sure to absorb significant resource, now is the time for a period of reflection on which pension initiatives should be advanced as priority and which might be reconsidered."

While Steve Webb, director of policy at Royal London, said: “Altmann deserves considerable credit for standing up for workplace pensions and challenging the Treasury over its desire to scrap pension tax relief and move to a pensions isa.  

“The new minister takes over at a time when there is much to be done in the world of pensions. Millions of workers are yet to be automatically enrolled and millions more are not saving enough for their retirement.”  

“We need an end to tax relief being seen as an annual 'piggy bank' to be raided by cash-strapped chancellors. And we need a coherent policy between Treasury and DWP, not least when it comes to pensions and isas.

"Let us hope that the new ministerial team will have a long tenure and that we will not see a return to the revolving ministerial door that we have seen in the past,” Webb said.

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Ros Altmann and the reshuffle

Stepped down? To the best of my knowledge, she was sacked.

Posted by: John Allan, 18 Jul 2016

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Richard Hubbard

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Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.

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