Increasing auto-enrolment contributions, reforming tax relief and extending new guidance service Pension Wise should be priorities for the new pensions minister, say industry experts.
This week former Saga director general and older workers’ champion Ros Altmann was appointed pensions minister as part of the Government’s reshuffle.
The pensions industry wasted no time in setting out their wishlist for the next parliament.
Changes to tax relief seems certain to be on the Government’s agenda. Prior to the election the Conservatives unveiled plans to introduce a sliding reduction in the annual allowance for those earning more than £150,000 and had already announced it was cutting the lifetime allowance to £1m from 2016.
Altmann has previously called for the lifetime allowance to be abolished.
Hargreaves Lansdown head of pensions research Tom McPhail supports abolition of the lifetime tax-free pension saving cap, as does Aegon chief executive Adrian Grace and JLT Employee Benefits chief executive Duncan Howorth.
The new minister should also boost auto-enrolment contributions beyond the current 8 per cent requirement, experts say.
Former pensions minister Steve Webb backs a system of increasing contributions in line with pay rises.
Now: Pensions chief executive Morten Nilsson also supports so-called auto-escalation, while Royal London group chief executive Phil Loney says the industry should be “nudging younger savers, with help from their employers, towards saving around 15 per cent of income”.
Loney also says the Money Advice Service and the Pensions Advisory Service should be merged into a “single truly excellent financial education service for all”.
Altmann has indicated she wants to expand Pension Wise’s remit beyond at-retirement guidance. However, responsibility for Pension Wise currently lies with the Treasury.
Webb oversaw the legislation introducing the single tier state pension, which takes effect from 2016.
Fidelity World Investment retirement director Alan Higham says the Government should produce state pension forecast updates “so that all those within 20 years of state pension age can have a reliable forecast of their state pension under the new rules”.
However, JLT’s Howorth warns the “current system for the state pension looks unsustainable without a significant increase in tax, albeit over a relatively long period”.
He adds the triple-lock means the state pension will cost £100bn this year alone.
Higham says there should be a formal procedure for reviewing and tweaking the state pension age based on “regular longevity assessments”.
Webb also planned to introduce the controversial ‘pot follows member’ model to amalgamate small pension pots.
Nilsson says there needs to be cross-party consensus on automatic transfers.
He says: “We believe transfers should only be allowed to schemes that have been independently verified as meeting strict standards such as The Pensions Regulator’s master trust assurance framework or the National Association of Pension Funds’ Pensions Quality Mark.
“We also think the Government’s proposed £10,000 ‘small pot’ limit is too low to be engaging to scheme members – given the rule of thumb that engagement kicks in when a pot approaches annual salary level; we think the limit should be £25,000.”
Loney also calls on Altmann to introduce legislation to make the open market option compulsory.
In addition, he backs making advice mandatory for people selling on their annuities under the Government’s plans to create a secondary annuity market.
Higham warns extra resources “must be found” to tackle to pension fraud.
He says: “Occupational schemes are too easy to establish without adequate controls around governance and are a perfect vehicle for fraud.”