View more on these topics

Personal issues

As part of the recent Government’s reshuffle, former transport minister Rosie Winterton replaced Mike O’Brien as pensions minister. The reshuffle also saw Personal Accounts Delivery Authority chairman Paul Myners join the Government as City minister, with Pada non-executive director Jeannie Drake appointed in his place as temporary chairman.

Aegon head of pensions development Rachel Vahey says: “We are on the final straight of the Pensions Bill after a fairly tortuous 10 months and to change minister in midstream seems a peculiar move.”

Winterton will have to get up to speed fast over the next few weeks. Vahey says last week’s Lords debate showed the Bill is not yet “home and dry” and that there remains significant sticking points on public subsidy and qualifying earnings, for example.

Vahey says it will be a challenge for Winterton to get to grips with this latter area but that hopefully a fresh face looking at the issue may highlight the significant risk this requirement poses to existing provision.

In a speech at last week’s NAPF conference in Edinburgh, Work and Pensions Secretary James Purnell confirmed plans for schemes to prove contributions are equal to or better than the value of 8 per cent of qualifying earnings on an annual basis.

The industry has expressed strong concern that this test will lead to the closure of many existing schemes, with employers opting to use personal accounts rather than dealing with the extra administration involved.

Purnell told delegates: “We recognise there are employers and schemes out there who wish us to go further on changing the test and we are considering if there is anything more that could be done without disrupting the balance we have worked hard to strike.”

Standard Life senior pensions policy manager Andrew Tully says potential unfairness to women is another major worry regarding personal accounts and that coming from a woman’s perspective, Winterton may be able to offer a fresh perspective.

Hargreaves Lansdown pensions research manager Tom McPhail believes there are still unresolved issues surrounding means testing and levelling down and the arrival of the new minister will make it harder for the industry to negotiate a sensible solution.

McPhail agrees she has precious little time to get up to speed. “It is the political equivalent of a hospital pass,” he says.

Association of British Insurers spokesman Jona-than French says it is integral that Winterton listens carefully to the views of everyone involved in the debate, including the pensions industry.

“We all share the same objective in this current round of pension reform – to get more people saving more money for their retirement. Automatic enrolment, rather than personal accounts, is the big story. If, as we argue, it can be brought in for existing workplace pensions schemes as soon as possible, that will be a major success.”

Doubt has been cast over the timing of the launch of personal accounts. Tully says that while the Government has committed itself to a 2012 launch, it is “always possible that this will slip”.

He says there is not a lot of time to create the Government’s pension platform. “It will need testing, which will take time. It would not surprise me if it slipped by a year,” he argues.

Friends Provident head of pensions marketing Jeremy Ward says: “I would be amazed if it happened on time If there is to be a change of government between now and then, which many people think could realistically happen, where will the Government want its image to be, the Olympics or focusing on personal accounts? Most people do not even know about personal accounts and if by some chance it did not happen, they would not even realise what they had missed out on.”

Tully agrees that an election and potential new Government could mean that the timetable for personal accounts are pushed back further.

Ward also points out that the issue of personal accounts has been put on the back seat due to the current credit crisis and that there is still a lot of detail to emerge.

The Department of Work and Pensions and Pada both claim that changes of personnel will not blow personal accounts off course.

A DWP spokesman says: “We are committed to establishing personal accounts by 2012. That is the timetable we cont-inue to work towards”.

He adds there should be no doubt over the suitability of Winterton’s appointment. “We have worked closely with the industry over the last few years. The new pensions minister will of course continue this dialogue, listening to their concerns as previous ministers have done.”

A Pada spokeswoman says the organisation is confident that personal accounts will be ready for the onset of employer duties in 2012 and that, as part of the Government’s wider reforms, it will make a “positive difference to the retirement incomes of millions of people”.

Recommended

New testament

Last week, I took an introductory look at the Conservatives’ proposed £1m nil-rate band for each of a couple. Let’s look in detail at what the introduction of a transferable £1m nil-rate band might have on a selection of key investor categories.

DC pensions funds prove worth

Well designed default funds can help against the problems that politicians are seeking to address by reviewing rules on compulsory annuitisation.

Reforming India: just the beginning

By Kunal Desai, Neptune India Fund

As global investors continue to scour emerging markets through the lens of reform potential, India shines bright. Indeed, we think it can sparkle even brighter. We anticipate India’s self-imposed 10-year ‘policy holiday’ to turn into one of the most pro-growth and pro-investment policy calendars seen in Asia in years. The Indian electorate has engineered a historic verdict. We now have the strongest Indian government since 1984, with the pro-market Bharatiya Janata Party (BJP) achieving an absolute majority for the first time in the party’s history.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment