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My 2020 vision for pensions

My 2020 vision for pensions

What a year 2019 has been in the world of pensions. Aside from the political and economic uncertainty which has impacted on every area of legal and business life, there has been no shortage of pensions headlines hitting the news. 

As 2019 is nearly at a close and we head off to enjoy the festive fun, what do I think 2020 will/should have in store for pensions? Can that be predicted with any accuracy given that things have been moving at such a pace?  The results of the General Election last week certainly give us more of an indication of the direction in which we may be headed. 
Those of us working in pensions every day will know that topics such as equalisation, funding, environmental investing, new consolidator vehicles, accreditation of trustees etc. will all rumble on. But for me, what is crucial is driving forward the aim of three key themes.
Engagement 
Getting people to a place where they can understand what pension saving they have (public and private), when they can access it, and how much they need to save now to be ‘comfortable’ in retirement surely needs to be the focus of everything we do in pensions. Hardly a week goes by without another survey confirming how few of us know what pension saving we have and how much we need to save going forward. 
But achieving engagement is the really hard part. Scheme trustees, employers and administrators will need to become more tech savvy to present this information in a more user friendly way to encourage the generations who are many years away from retirement to engage at an early stage.  The proposed online ‘pensions dashboard’ should be a big step towards this. 
Engaging those who don’t already have workplace pension saving is even more important. The UK auto-enrolment regime with minimum employer contributions does not include everyone: the self-employed and the youngest members of the workforce are currently excluded. The Conservative Government is expected to revisit its previous commitments on extending the remit of workplace pensions and we await developments with interest. The wide publicity of the ‘Backto60’ campaign and the rise in state pension age have highlighted that the state pension will not necessarily be available from the age you stop working, but more needs to be done to raise awareness of this.  
Trust
For people to buy in to pension saving, they need to be able to put their trust in it. The recent focus on targeting pensions scams, the collapse of high street retailers over the past few years and the pension issues which have followed make people incredibly nervous for the safety of their pension pot. 
The Pensions Regulator’s focus on increased regulation and governance in this area is set to continue. The Pensions Schemes Bill introduced in the Autumn detailed increased powers for the Pensions Regulator before it was whipped away with the dissolution of Parliament. The Bill included new funding requirements for defined benefit pension schemes, increased information gathering powers for the Pensions Regulator and, significantly, new criminal and civil offences against those taking certain action which is ‘materially detrimental’ to a defined benefit pension scheme.  Are pensions lawyers going to be expected to be criminal lawyers too? We are expecting this Bill to be reintroduced to Parliament very soon and we await the detail. The flip side of these changes, if introduced, is the potential impact on genuine corporate activity and the ‘burden’ on corporates funding defined benefit schemes. 
Pensions Tax 
The big headline hitter in this area in 2019 related to the NHS and was covered by my colleague, Amanda Jack, in her recent blog: ‘What’s keeping your Nan from getting a hospital bed?’. HMRC’s method of calculating earnings results in senior doctors incurring significant pensions tax charges when they work additional shifts, with the result that many are refusing to work overtime. This issue is not confined to the NHS and impacts high earners in all sectors. This, coupled with the general complexity of the current system, means that a wholescale review of the UK pensions tax system is necessary to ensure that people are continued to encourage to save. I can dream, can’t I? 
So is my 2020 vision for pensions likely to be borne out? We have a fair idea of the direction we are likely to be headed through the pensions maze at least during the initial part of the year. Beyond that?  I’ll get back to you next December when I am sitting with my mince pie mulling over the year gone by. 

As 2019 is nearly at a close and we head off to enjoy the festive fun, what do I think 2020 will/should have in store for pensions? Can that be predicted with any accuracy given that things have been moving at such a pace?  The results of the General Election last week certainly give us more of an indication of the direction in which we may be headed. 

Those of us working in pensions every day will know that topics such as equalisation, funding, environmental investing, new consolidator vehicles, accreditation of trustees etc. will all rumble on. But for me, what is crucial is driving forward the aim of three key themes.

Engagement 

Getting people to a place where they can understand what pension saving they have (public and private), when they can access it, and how much they need to save now to be ‘comfortable’ in retirement surely needs to be the focus of everything we do in pensions. Hardly a week goes by without another survey confirming how few of us know what pension saving we have and how much we need to save going forward. 

But achieving engagement is the really hard part. Scheme trustees, employers and administrators will need to become more tech savvy to present this information in a more user friendly way to encourage the generations who are many years away from retirement to engage at an early stage. The proposed online ‘pensions dashboard’ should be a big step towards this. 

Engaging those who don’t already have workplace pension saving is even more important. The UK auto-enrolment regime with minimum employer contributions does not include everyone: the self-employed and the youngest members of the workforce are currently excluded. The Conservative Government is expected to revisit its previous commitments on extending the remit of workplace pensions and we await developments with interest. The wide publicity of the ‘Backto60’ campaign and the rise in state pension age have highlighted that the state pension will not necessarily be available from the age you stop working, but more needs to be done to raise awareness of this.  

Trust

For people to buy in to pension saving, they need to be able to put their trust in it. The recent focus on targeting pensions scams, the collapse of high street retailers over the past few years and the pension issues which have followed make people incredibly nervous for the safety of their pension pot. 

The Pensions Regulator’s focus on increased regulation and governance in this area is set to continue. The Pensions Schemes Bill introduced in the Autumn detailed increased powers for the Pensions Regulator before it was whipped away with the dissolution of Parliament. The Bill included new funding requirements for defined benefit pension schemes, increased information gathering powers for the Pensions Regulator and, significantly, new criminal and civil offences against those taking certain action which is ‘materially detrimental’ to a defined benefit pension scheme.  Are pensions lawyers going to be expected to be criminal lawyers too? We are expecting this Bill to be reintroduced to Parliament very soon and we await the detail. The flip side of these changes, if introduced, is the potential impact on genuine corporate activity and the ‘burden’ on corporates funding defined benefit schemes. 

Pensions Tax 

The big headline hitter in this area in 2019 related to the NHS and was covered by my colleague, Amanda Jack, in her recent blog: ‘What’s keeping your Nan from getting a hospital bed?’. HMRC’s method of calculating earnings results in senior doctors incurring significant pensions tax charges when they work additional shifts, with the result that many are refusing to work overtime. This issue is not confined to the NHS and impacts high earners in all sectors. This, coupled with the general complexity of the current system, means that a wholescale review of the UK pensions tax system is necessary to ensure that people are continued to encourage to save. I can dream, can’t I? 

So is my 2020 vision for pensions likely to be borne out? We have a fair idea of the direction we are likely to be headed through the pensions maze at least during the initial part of the year. Beyond that?  I’ll get back to you next December when I am sitting with my mince pie mulling over the year gone by. 

By Caroline McIntyre,
Knowledge and Development Lawyer 

Burness admin