Change affects us all. Some embrace it, while others resist it. Some people say that “a change is as good as a rest” and I’m sure none of us like being short changed.
But whatever your view, you hope that change doesn’t simply happen for change’s sake and, if it is going to happen, it is properly thought through.
I, of course, don’t need to remind anyone of the saying “act in haste, repent at leisure”. Which brings me nicely to what I want to write about.
There is a massive – and sometimes heated – debate going on in the industry about pension charges (I can’t ever recall seeing a picture of a tank accompanying a Money Marketing article).
The response to the Government’s recent consultation has revealed divergent views. To my mind, a charge cap is inevitable and it is something the industry will have to live with.
It is a crying shame that one will need to be introduced, but I fear that the Government has gone too far down the track to back out of this one. And, on balance, that’s probably right given where we currently are with the wider debate about DC scheme quality.
Our view is that before a cap is introduced you need full transparency and accountability – a single cap for a single number.
Not to have this means that there will be all sorts of incentives and pressure to game the system. Importantly, that can’t be in the best interests of the saver.
But my main message isn’t about our views on the charges consultation, strong though they are. It is about whether there is anyone in Government joining this all up and ensuring that we don’t end up “acting in haste”.
If you listen to The Pensions Regulator talk about automatic enrolment for more than five minutes they will say that an employer should be thinking about things in good time and choosing its automatic enrolment scheme at least six months ahead of its staging date. Sounds like sensible advice.
Now, let’s think this one through for a minute…… The Government launched its charges consultation at the beginning of November and gave the industry a month (well, almost) to respond.
The consultation asked about what a cap should be without saying what should actually be capped? Probably one for another blog, but to me it’s astonishing to simply throw this out to the industry without a detailed proposal not least given the work the ABI, IMA and NAPF has done to try to improve transparency over the last year.
Even with the lack of any detail or concrete proposal, the Government is hoping that its new charge cap will come into effect for employers automatically enrolling in April.
At best, we can probably expect the Government to come back with its proposed course of action early in the New Year.
Now I’m no Nobel mathematician, but the Government’s consultation started just five months before it will affect those employers automatically enrolling in April, so if they hadn’t already chosen a scheme they would have been running late.
And, if they had? Then there is a real risk that they will need to unpick it. Also how does an employer go about choosing scheme in the current hiatus – employers just don’t know what the rules will be.
The cynic in my thinks that perhaps the Government just wants all employers to use Nest….. And therein lays the Government’s dilemma.
Not only is the Government responsible for the success of automatic enrolment, it is also building and funding a pension scheme, and driving up DC quality. All good, and necessary, stuff.
But it does lead to a potential conflict and, if we can be sure of one thing, it is that any Government policy on pensions will be made to fit Nest.
Automatic enrolment is difficult enough for employers. I’m a great believer in low charges and think that it is right that the pensions industry is put under pressure to offer maximum value for the saver.
But why the rush to cap and add complexity, making it a whole lot worse for employers going through automatic enrolment just when we should be helping them? I do hope the DWP doesn’t end up “repenting at [its] leisure”.
Darren Philp is head of policy at B&CE, providers of The People’s Pension