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Steve Webb interview: Govt reviews pension rules in fight against liberation


Pensions minister Steve Webb says the Government is considering legislative changes to tackle pension liberation following a clamp-down by regulators and a series of arrests earlier this month.

Earlier this year, a coalition of regulators launched a series of new documents designed to warn people of the dangers of attempting to access their pension early.

Last week, the City of London Police announced it had made a series of arrests across the UK following a major investigation into pension liberation fraud.

Industry experts have called on the Government to go further by raising the barriers to entry for those who want to set up and operate schemes designed to encourage people to access their pension before age 55.

Speaking to Money Marketing, Webb says: “I am very open to exploring whether we have got the legislation right on this. 

“But what we do not want to do is rush into doing something to stop a problem now and just create a new loophole or divert the activity. I sense some of the folk involved in this will just move on to the next scam if we are not careful.

“We do not want to tip anybody off as to how we are going to clamp down on these things but certainly we are looking at whether the current legislation gets us to where we need to be. It is very much on our agenda at the moment.”

Webb says the Government is also looking at ways to make it easier for trustees to reject transfers to suspected liberation schemes.

“I am looking at the role of trustees in all of this and whether we are giving them enough backing if they think something fishy is going on,” he says.

The minister is continuing to drive through a reform agenda focused on delivering value for money to pension scheme members.

As part of this, the Department for Work and Pensions announced last week its intention to ban consultancy charging for automatic enrolment pension schemes. 

Webb says the decision was influenced in part by research conducted by Which? in January suggesting insurers were willing to accept consultancy charging fees of up to £450 per member for the first year.

The consumer organisation also found that almost two-thirds of people who are eligible for auto-enrolment and not currently contributing to a workplace pension would be more likely to opt-out if they were hit by high consultancy charges.

“Which? fed into us with their research and some of their findings were particularly scary,” Webb says.

“But what struck me was the way the entire market moved [following the consultancy charging review announcement in November]. By the end of that process we were knocking on an open door and most people seemed to accept a ban was the right way to go.”

While the formal process of consultancy charging has been banned, Webb says companies planning to pay more than the auto-enrolment minimum are free to reduce contributions in order to pay for advice.

He says: “I had a long conversation with [Scottish Widows chief executive] Toby Strauss about his intermediate proposition and one of the things that emerged from that conversation was the monitoring burden of a halfway house solution.

“I can say now if firms want advice, that’s great. You pay for it, it is transparent, we have a clear market for it and if it benefits employees then that is great. 

“If firms want to recover some of the cost by putting less into the pension that is an option.”

The DWP also plans to consult on introducing a pension charge cap for default funds.

Webb refuses to give any indication of the level of cap the Government will propose but acknowledges the complexities involved in interfering with industry pricing.

He also suggests a price cap is necessary to make sure the proposed auto-transfer system for pension pots worth less than £10,000 does not result in consumer detriment.

“To make pot follows member work you have got to be confident that you are not transferring people from good schemes to bad schemes, but you also have to be clear you aren’t auto enrolling people into bad schemes in the first place,” Webb says.

“We think quality has a number of dimensions but costs and value for money has to be one of them.

“In the particular sphere of auto-enrolment and default funds, safeguarding people from the extremes will protect the reputation of automatic enrolment.

“But clearly it is a messy business to decide which charges you include and exclude and from that what the right cut-off would be.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. So Steve makes his decisions based on a Which survey! How many people took part in the survey, what was the question that Which asked? So a good outcome that employers who were/are prepared to pay more have the green light from Steve & Which to pay less. Excellent.

    But we don’t want to rush in and stop the scandal of Pension Liberation – need to think that one through a bit more!

  2. OK -sounds like he might understand more than people give him credit for.
    If he and the FCS engaged more directly with those at the coalface, there’d be less chineese whispers in between, nor journalstic or versted interest spin (not meant as criticism of MM)

  3. The really sad thing here is that everyone knows that AE level contributions wont be enough for most people to retire on. This applies whether the individuals have 0% charge on their savings or 1%.

    People need, education, guidance and potentially advice to encourage savings levels up into double digit %s. Commission, consultancy charging etc allowed for this advice to be paid for in a way that most people were happy with – i.e. not writing a cheque. Did it really matter if there was a 1% charge or a 10% initial payment etc?

    As usual, 1 or 2 sharp practices from a few greedy individuals have ended up being seen as indicative of the rest of the industry. Instead of penalising those who were guilty everyone has to suffer instead.

    The really sad thing is the peope who suffer long term will be the employers who get AE wrong, employees who don’t save enough and hundreds of advisers that will end up on benefits instead of earning an honest living.

    5 months into RDR, 7 months into AE and everyone can see what a mess pension planning in this country is becoming – except the misinformed idiots creating legislation that will have repurcussions for many years to come.

    God help us all.

  4. The best “pension liberation” which HMRC/PSO/Webb seem incapable of shutting down is the old “ghost employer scheme”. No real employment. Transfer your existing pension into it, resign the benefits, refund surplus to “ghost employer” and pay it out as a dividend. You do not even have to make retirement age. Normally a 10% fee, but what the heck. no=one seems to mind. Even better if you are non-resident.

  5. Mr Webb is very good at making “legislative changes” and closing “loopholes” too.

    Witness the fiasco of the ‘overseas spouse’ and the ‘Internet bride’ to make my point.

    The overseas spouse was a beauty! A blitz of media activity to divert everyone’s attention towards the spouse who’s abroad, and away from the UK spouse. Ingenious!

    And ‘loophole’ – your word Mr Webb, I can’t recall anyone using that term before to describe that piece of legislation.

    “Internet brides” a wonderful cloud of smoke with highly polished mirrors too!

    But then Mr Webb has had plenty of practice.with words. While in Opposition he signed an EDM declaring the UK frozen state pension to be discriminatory and unfair. Once in power, a swift U turn took care of that.

    I am one of the 4% of the UK state pensioner population affected most severely by this odious piece of British legislation, which by minister’s own admission could be done away with by “the stroke of a pen”.

    He has perfected this U turn manoeuvre with much practice, so it might get used again.

    In the light of the new Charter of the Commonwealth which abhors discrimination of any form, and evidence from UK based think-tanks that say unfreezing the pension would be financially beneficial to the UK, what’s stopping him doing yet another U turn and “liberating” our frozen pensions??

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