If they had a competition to name this Green Paper, they’d call it Dampy MacSquibface.
The much-anticipated pensions Green Paper in response to the demise of BHS dropped into the industry’s inbox yesterday.
It contains many more questions than answers, saying no to lots of things and yes to nothing. If this was a squib, it would be very much of the dampest kind. Dampy MacSquibface if you like.
The bluster of the Work and Pensions Committee is nowhere to be seen. The Paper is littered with phrases like “we do not feel there is sufficient evidence”, “all of these options have significant drawbacks”, “we would need to be certain” and “it would not be appropriate”. The world of pensions is slow enough to change – do we really need yet another agnostic consultation?
On funding and investment, the Green Paper turns many of the Work and Pensions Committee’s recommendations into consultation questions.
Do we really need to debate shortening the 15 month timescale on actuarial valuations? Really, come on. If any of my clients took 15 months I would be drumming my fingers for 13 of them.
The insinuation is that some advisers don’t understand the flexibilities that exist in the current regime. Sadly, my recent experience shows this to be correct. I even saw advisers running for cover when the Work and Pensions Committee made some recommendations. If you give people flexibility, it is difficult to blame the rule-makers if some people don’t use them.
The consultation then asks “Do members need to understand the funding position of their scheme?” That must be the first time I’ve seen a rhetorical question in a consultation exercise.
There are some interesting questions on investment, but are these better dealt with elsewhere? For example, in the FCA review. There is also a massive amount of investment pooling already. The growth in the use of investment platforms by smaller/medium sized schemes is evidence of this.
We finally reach some matters of real substance when it comes to special arrangements for “stressed” schemes and the consolidation of smaller schemes.
In relation to genuinely stressed schemes, my experience is that some schemes (and more importantly their members) could benefit from greater flexibility. However, I also believe that no matter what flexibility is offered, some schemes are not going to survive. The reticent tone of the consultation in this area indicates that major change is not on the agenda – perhaps only the much-mooted removal of the RPI “hard-coding” will be looked at.
On scheme consolidation, many ideas are floated and the Government is supportive of “voluntary consolidation”. There are many hurdles to mass consolidation and it is not a panacea, far from it. The Government seems to prefer to see how the market gets by on its own on this point.
So, in summary:
Will there be consensus? No.
Is there any government momentum for change? Doesn’t look like it.
Will any significant changes come into force before the next election? No chance.
The short to medium term domination of Brexit issues means that no seismic changes to the world of pensions will see the light of day any time soon. In the meantime, I will get back to the day job of helping trustees and employers manage their schemes in the current challenging environment rather than looking for salvation from elsewhere.