The year is just a few weeks old and yet I feel a stream of consciousness of financial services policy events hitting us all.
Standard Life, Penrose, the Treasury select committee and endowment sales, the Child Trust Fund Bill, the FSA business plan and structure, financial capability, price capping, the Retirement Income Reform Bill, Informed Choice on workplace pensions -I need to catch my breath after that little shopping list. You probably do, too, with a significant rise in business levels appearing to have startled the market.
It has been quite a start to 2004. Oh yes, and for the politicos among us there is the matter of top-up fees and Hutton keeping everyone entertained and somewhat nervy.
The generally frenetic air around Westminster is testament to the fact that MPs can see the general election coming into view. Spring 2005 is the most likely date for Tony Blair to go to the polls and yet there is a considerable amount of legislation to pass in the interim. Some important policy drivers have emerged and will set the tone for much debate in the rest of the year.
As I write this, we are still awaiting formal publication of the Pensions Bill, which will focus primarily on shoring up existing company-based pensions by creating a pension protection fund. The major reason we have yet to see the Bill reflects the fact that the Government is keen to get its ducks in a row.
Following the Chancellor's pre-Budget announcement before Christmas, we are set to see the National Audit Office's assessment of the proposed £1.4m lifetime pension cap announced on March 17. It clearly makes more sense to pursue the main legislation in Parliament following this announcement, despite the clamour to get the bill moving.
The bill comes at a time when the Treasury select committee is running an important inquiry into restoring confidence in long-term savings. I am glad that the select committee has decided to pursue such an agenda as policymakers appear extremely interested in how the industry will go about stimulating the savings ratio, which is currently at an all-time low.
Last week, the Department for Work and Pensions started to pursue an important dimension in creating policy drivers which might support greater saving. Work and Pensions Secretary Andrew Smith and pension minister Malcolm Wicks launched the Informed Choice initiative, which follows on from the Government's Green Paper proposals of December 2002.
In case you missed the announcement, the core idea is for workplace schemes to encourage greater pension saving by insisting that employees have to elect positively not to join their scheme. To allow employers to provide greater access to information about saving in the workplace, some existing regulation will be revisited to ensure companies are not penalised for offering support and guidance.
To quote the DWP: “Currently, it is recognised that there is a lack of understandable and trusted information and many people do not engage with the choices that they have and, as a consequence, make no choice at all.”
Much of the initial comment from all parties has been relatively positive. Tory Work and Pensions spokes-man David Willetts said: “I do welcome the Government's specific proposal that employees might opt out of a company pension scheme rather than opt in. This is something that I proposed nearly a year ago.” Well, the Government appears to have listened.
The one very positive thing about this kind of announcement is that there is an opportunity to start to create a national consensus on how to get the nation saving once again.
The huge lack of public understanding about retirement savings and the options available means that there is a big place for financial advice. I sincerely hope that organisations such as Aifa are able to engage fully in the policy work programme There has been another equally important development in the past few weeks – the principle that the Government has established on lifting the 1 per cent price cap on the child trust fund during the passage of the bill to create the product.
The Treasury has been at pains to suggest that the new 1.5 per cent price cap for the child trust fund is not set to be a precedent for any wider decision on pricing for the Sandler suite but this move clearly shows that the Government is listening to informed commentary end lobbying on the issues.
It should also prove to be a major fillip for the child trust fund and ensure that the number of providers entering the market is greater than predicted. This has been another widely positive move towards encouraging the savings habit.
The noise emanating from Westminster on pensions and long-term savings is set to rise in the coming weeks as the Treasury select committee continues its inquiry and the Government's Pensions Bill starts its Parliamentary journey. If the first few weeks of the year are anything to go, by it appears that the Government and the main Opposition might just be starting to make the right encouraging moves to get savings back on its feet.
Iain Anderson is a director and chief corporate counsel at Cicero Consulting