Pensions minister Ros Altmann has announced that plans to impement defined ambition pensions, collective benefits and automatic transfers (also known as pot follows member) have been put on hold.
In a statement to the House of Commons, the pensions minister (pictured) said that the timing was not right to ask the pensions industry to adjust to further reforms in light of the changes already underway and the time these will need to successfully bed in.
Speaking at the National Association of Pension Funds (NAPF) Annual Conference and Exhibition 2015 (now known as the Pensions and Lifetime Savings Association) on 15 October, Altmann stressed that these policies are not off the table for future consideration. “This isn’t abolished, this isn’t abandoned, this is on hold for the moment because of all the other changes going on.”
She explained that many of the strategic decisions she has made are down to timing rather than the policies themselves, noting that if the decision were taken to implement defined ambition and collective benefits, it is unlikely that regulation would be in place for these before 2018.
She said: “We have to protect defined benefit that we already have: millions of people with billions of pounds need that to be looked after. We have to develop DC [defined contribution] in the ongoing new landscape as that rolls out.
“I am, of course, interested in a vision of a middle way between defined benefit and defined contribution, and collectives or defined ambition will be a future reform, but either we’re a bit too early or we’re quite a bit too late so I don’t think it’s a priority for now.”
Margaret Snowdon OBE, director at JLT Employee Benefits, said: “Automatic transfers was fatally flawed from the outset, so it is great to see the pensions minister making a tough but pragmatic call.
“The cost of proceeding would have been very high for little benefit to anyone. Common sense has broken out.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, added: “Given the challenges in communicating the hugely complex changes to the state pension, the DWP’s [Department for Work and Pensions] limited resources are far better employed getting this right than on trying to introduce defined ambition pensions for which there is no apparent market appetite.”
Kate Smith, regulatory strategy manager at Aegon, said: “Collective defined contribution (CDC) is incompatible with the recent pension freedoms so it’s not surprising the government has decided against it. Under the Dutch CDC model, where this idea came from, people can only receive their pension at the time and in the format set out in the scheme rules, which clearly goes against the trend towards greater flexibility.
“In addition there appeared to be very little appetite to implement a complex new form of pension scheme among employers which are focused on the successful roll out of auto-enrolment and giving access to the pension freedoms.”
Altmann has also announced that the government is to launch a media and communications campaign to promote workplace pensions and encourage engagement. This is in line with one of the key priorities she set out in her speech; improving communications and making pensions more user-friendly.
Other upcoming areas of focus include increasing the reach of the Pension Wise service, which will move to the DWP by March 2016, as well as the launch of a consultation on simplifying the valuation of guaranteed annuity rates in the autumn.
She said: “There’s lots going on, there’s plenty for us all to do. I am going to stick to priorities that are most urgent for now. I have made some decisions on timing. And I think this is an incredibly exciting and challenging time for pensions.”