What has changed to prompt the Tories to break the consensus on personal accounts and universal automatic enrolment? This is a question people trying to plan for 2012 are asking and the answer is far from clear.
Conservative pensions shadow Nigel Waterson is understandably upset he was not consulted on the lengthy lead-in time for micro-businesses, given the likelihood of a Tory Government having to take over management of the project in seven months’ time. Employees of large firms will be justifiably disappointed to learn they will only receive a 1 per cent employer contribution in the first three years.
This aside, are the pension reforms any less worthy of support today than before the rollout announcement?
As I see it, the Tories are breaking the consensus on personal accounts and universal enrolment because they do not like the delay caused by extending the rollout period for small businesses to sign up.
The DWP set this timetable after representations from the Personal Accounts Delivery Authority that enrolling more than a million businesses into the scheme in a shorter timescale was not feasible. Waterson himself argued it was important to avoid a Terminal 5 moment when personal accounts are launched. Yet now, the Conservative party is asking for no contracts to be signed by Pada until after the election.
The official period for a downing of tools is, I believe, three months before an election. Labour would effectively be hanging out the white flag were it to comply now.
Putting pension minister Angela Eagle’s announcement on implementation in context, she is effectively saying some people will not receive the full 8 per cent of contributions until 18 months later than had been envisaged. Delaying the whole process for seven months to catch up, tossing aside hard-won consensus across political parties and unions in the process, makes little sense.
A further issue is the range of problems now being raised. Concerns over means-testing have not been deal-breakers in the past, so why now?
Furthermore, the Tories are calling for the immediate introduction of automatic enrolment for existing schemes. This would be welcomed by the industry but does not square with concerns over means-testing. If you automatically enrol someone into a pension today then they will be at as much risk of being missold as they will be in 2012.
Ed Vaizey, Tory culture shadow, has reportedly warned the Government that it faces the greatest misselling scandal of all time if personal accounts go ahead as written. But weren’t all three main parties signed up to this consensus a couple of months ago?
While the Conservatives have remained consistent on saying they will review the way in which personal accounts and automatic enrolment operates as soon as they get into power, the message at the moment seems to be the whole project is in the air, causing planning blight in the industry.
Bringing pre-retirement access to savings into the personal accounts plan may be a good idea but this can be achieved as an add-on without stopping the entire process now.
It has taken years of work to build this consensus and it would be a great shame if the pension reforms were blown out of the water at this stage.
John Greenwood is editor of Corporate Adviser