James Walsh, policy lead: EU & International at the Pensions and Lifetime Savings Association discusses the political priorities for schemes and trustees in 2016
What has been the most significant change in pensions policy this parliament, and what will be its impact on pension schemes?
I am bending your rule straightaway by plumping for pensions freedom. Yes I know it was announced before the last General Election, but this reform is so significant that it cannot be ignored – and the implementation has largely been in the current Parliament, anyway.
Fully understanding the impact of pensions freedom on savers’ behaviour will take a while and schemes are rightly taking their time before deciding what it means for issues such as the structure of default funds.
The more immediate challenge for schemes is to be clear about what they can do to help their members decide how to use their DC pension pots at retirement. We would like to see the law allow trustees and employers to use ‘safe harbour’ signposting. This would point their members towards retirement solutions that meet a Retirement Quality Mark.
2. What is the most significant change we are likely to see over the rest of this parliament?
The introduction of the Lifetime ISA is potentially very significant – especially if the Chancellor develops it in future Budgets.
Anything that helps people to save more for their retirement is welcome, and our own name change last year (you might remember we used to be the National Association of Pension Funds) recognised that pensions will form part of a wider range of retirement saving in the future. But there are vital questions to be answered about the LISA – not least on charges and ensuring quality. We will be pressing for answers.
3. What potential policy development should the pension sector fear most, and what would do most to improve member outcomes?
As Bill Clinton’s campaign guru James Carville famously said, ‘it’s the economy, stupid’. Another global or European economic crisis remains the single biggest threat to retirement incomes. You can quibble about whether this would count as a ‘policy’ development; my view is that all economic developments can be traced back to someone’s policy if you look hard enough.
There isn’t much we can do about the economy itself, but helping people to save more in well-run schemes remains the best way of safeguarding your own retirement prospects. So it comes back to some familiar messages – we need high-quality governance for pensions and saving products, all backed up by efficiencies of scale and good regulation.