We are only half-way through January but already we are seeing the classic hallmarks of a pre-election year.
We read almost daily of think-tanks pitching their proposals, while government and opposition parties are flying policy kites to see which soar away and which crash to earth.
Those that fail may reappear with a different shape and colour, and at the end of the process we will hopefully have a set of manifestos with commitments that genuinely help the consumer.
I expect four major strands in proposals affecting pensions.
State pension reform has been a constant theme in recent years, including improvements to entitlement in 2010, a single-tier pension from 2016 and increases to state pension age. There is continued lobbying for further change, including raising the ages more quickly and making the pension means-tested. However, politicians may not have the appetite to revisit the fundamental structure of state pensions, so debate could focus on the triple lock and other factors affecting pension levels.
Automatic enrolment will be prominent, with well over 30,000 employers reaching their staging dates this year and there will be focus on both how the market copes with the volumes and what opt-out rates are. However, debate in this area is likely to centre around charges, including the proposed charge cap, the review of legacy scheme pricing and increased transparency. Whatever happens we must make sure any changes do not prevent employers and providers sticking to the auto-enrolment staging timeline.
Speculation on changes to pensions tax relief never goes away and we can expect to see all parties laying out their stalls, with the likelihood of significant changes whatever the election result. This could mean pensions becoming less attractive for very high earners, and possibly for all higher-rate taxpayers, but may also involve greater incentives for lower earners to save. Whatever the outcome, we believe it is important the money stays within the savings framework.
And finally there is the annuities dilemma, where a lot has happened in the last year. The ABI code of conduct means consumers must now consider their options rather than just ticking a box, its ‘annuity window’ gives consumers a tool to assess how well their current provider compares to others and the PICA directory will help consumers to gain access to advice.
Despite these initiatives, the market is widely perceived as inefficient in its current form. The future agenda may be driven by the outcome of the FCA’s thematic review, including an assessment of profit levels. Whatever the outcome of the review, the industry must strive to work together in order to ensuring better outcomes for consumers.
And then, as always, we must expect the unexpected.
A year ago pensions liberation was just beginning to register as a significant issue and a charge cap appeared unlikely unless there was evidence of consumers being automatically enrolled into high-charging pensions (which has not happened).
If a week is a long time in politics, 16 months is an eternity, and come May 2015 the big issue could be something we are currently largely unaware of.
Whatever happens, it will be an interesting and challenging period, but also one with opportunities for those who can adapt quickly and meet consumer needs.
Ian Naismith is head of pensions market development at Scottish Widows