The newly-elected Conservative government has reiterated it is going to roll out the long-awaited pension dashboards and collective DC schemes through the Pension Schemes Bill.
The move had already been promised in the October 2019 Queen’s Speech
Guy Opperman has also been confirmed as pensions minister.
“We welcome the reintroduction of the Pension Schemes Bill in the Queen’s Speech, which included long-awaited rules around pensions dashboards, collective defined contribution schemes, and new powers for The Pensions Regulator,” said Danny Wilding, partner at Barnett Waddingham.
“This fulfils a pledge in the Conservative Party manifesto, as well as the pledge to launch a review of the tapered annual allowance ‘tax trap’ within 30 days of the general election.
“Still missing in action so far is their promise to tackle the ‘net pay’ workplace pension schemes anomaly where pension tax relief is concerned.”
Time-sensitive matter
Steven Cameron, pensions director at Aegon, said the introduction of the pension dashboards will improve retirement planning form many people in the UK.
“Pension dashboards are the aspect of greatest and most wide-reaching importance,” he said.
“Millions of individuals have multiple pensions in which they’ve built up benefits over their working lives and dashboards will allow them to see all of their workplace and personal pensions together, online at the touch of a screen.
“For many their state pension is a significant proportion, so it is vital state pensions are also included from as early as possible.
“Dashboards offer a huge opportunity to help millions of individuals better engage with their retirement planning, understanding if they are on track for the retirement they aspire to, and if not, to take action accordingly.”
More work needed
Tom Selby, senior analyst at AJ Bell, believes the dashboards could let customers get a “better deal by shopping around”.
But there might be issues concerning timelines and user-friendliness.
He said: “This engagement is absolutely critical in a world where defined benefit schemes are dying out and the majority of people keep their pension invested via drawdown in their later years.
“However, under plans outlined by the previous administration, the introduction of dashboards will be phased, with schemes not required by law to provide the necessary information for up to four years.
“As a result, the first versions of dashboards will not show all of people’s retirement pots in one place.
“Over half of respondents to our survey said this would put them off using dashboards, which is unsurprising given many people’s user experience is now driven by slick online banking and financial planning apps.
“Provided early users aren’t terminally turned off dashboards, it is clear there is significant demand for more retirement information and engagement among UK savers.
“Well over a third of respondents to our survey said dashboards would help them manage their pensions better, while a fifth said they would be encouraged to increase contributions if they could see all their retirement pots in one place,” Selby added.
Collective pension schemes
The Pension Schemes Bill will also introduce collective DC schemes to the market.
That is something UK post provider Royal Mail and the Communication Workers Union have been in talks with the Department for Work and Pensions since early 2019.
“We believe that these risk sharing arrangements have the potential to provide better member outcomes on average compared with individual DC arrangements, and the fixed contribution aspect is likely to be highly attractive to sponsors compared with DB schemes,” Wilding added.
“For a CDC scheme to be successful it will need to have a decent level of contributions, be able to pool risks, and achieve economies of scale to keep expenses at a reasonable level.
“We believe that the biggest potential market for CDC schemes is therefore not individual companies, but employment sectors within which individuals may move between employers during their career.
“One of the key advantages of CDC arrangements is their flexibility – CDC schemes can invest in riskier assets for longer than DB schemes, and be funded on more risky asset strategies and realistic (rather than prudent) funding bases.”
