August was a very quiet month in pensions, with perhaps only three things of note happening.
1. MPs accuse the Government of complacency over cost transparency in the pensions industry
On 5 August Frank Field’s Work and Pensions Committee published a hard-hitting report on its inquiry into pensions costs and transparency. The report acknowledges progress in various areas but concludes overall that it is ‘unconvinced’ that the industry will rise to the challenge of providing clear, transparent information to pension schemes about the costs and charges of investments without legislation requiring mandatory disclosure to a set format for both DC and DB schemes.
The report set out recommendations that went way beyond the pension costs and transparency agenda. They include matters such as the pensions dashboard, accessing DC pensions savings, tax relief on member contributions and FCA resourcing to combat pension scams.
It will be interesting to see what impact the report has on pension policy.
2. The Government moves closer to a complete rethink on the tapered annual allowance
This is wrapped up in the 7 August announcement that the Government will launch a consultation on replacing the 50:50 aspect of reforms to the NHS Pension Scheme that was part of the pension package proposed for senior clinicians in July.
HM Treasury is to review how the tapered annual allowance supports the delivery of public services such as the NHS. It has been reported that the findings of this review will emerge in the Budget and that any eventual reforms would be likely to apply across the whole public and private sectors.
This review is significant. Until now the hope in Government circles had been that the pensions tax crisis in the NHS could be resolved within the current pensions tax framework. It cannot. As this is morphing into a wider review of the tapered annual allowance, it seems that policy in this area is shifting, with the possibility of the taper either being scrapped or substantially modified in this year’s Budget.
3. Changes to the Pensions Ombudsman to go ahead
On 8 August the Department for Work and Pensions (DWP) announced that a number of proposed changes to the operation of the Pensions Ombudsman’s office are to go ahead.
The main change is the formalisation of an early resolution process, which the Ombudsman’s office has been successfully running since the transfer of the Pensions Advisory Service’s facility in March 2018. As this differs from the Ombudsman’s traditional investigation and determination role, an appropriate regulatory framework needs to be built. Amongst other things, the Government intends that this early resolution process should be available at any stage, including before a pension scheme’s formal internal dispute resolution process has been invoked, with the expectation that, in the majority of cases, this will be when it is used.
The other principal change is that an employer will be able to bring a complaint on behalf of itself to the Ombudsman in relation to the provider or administrator of its employees’ group personal pension scheme.
This is good news on both counts and hopefully DWP can bring forward the necessary primary legislation in time for the Pensions Bill. Further changes will need to be set out in regulations.
Partner – Lane Clark & Peacock