MINISTERIAL INTERVIEW: Tea for two
Editor Stephanie Hawthorne shared a quick cuppa with Richard Harrington, the new pensions minister, at the Pensions and Lifetime Savings Association conference. Here are his thoughts.
Stephanie Hawthorne: What is at the top of your to-do list?
Richard Harrington: Continuing the auto-enrolment programme, which is at a very exciting and critical stage. We are looking in detail at defined benefit (DB) schemes and publishing a Green Paper in the winter to discuss what options are available, what our thinking is and what, if anything, the government can do.
Hawthorne: Would you like to see auto-enrolment extended to lower wage earners and the self-employed?
Harrington: I can’t say that it will happen in the near future, but the government has set up this complex machinery which seems to be encouraging, in terms of the small numbers opting out of it. It seems to me that in future we will be able to put other things under that umbrella. Personally, and we are not at this stage yet, it seems logical that we could extend this to other categories, in particular the self-employed on lower income levels without accountants and SIPPs. It is too early to say.
I think the advertising has sold the idea to a lot of people who haven’t previously thought about it. I am very impressed with NEST. I visited them quite recently. I’ve seen the products and the statements online. It is very user friendly. I would like to think it suits many self-employed people.
Hawthorne: Will there be any movement on the lifetime allowance or annual allowance?
Harrington: I’ve no idea. That is for the Treasury.
Hawthorne: Returning to DB, what changes would you like to see?
Harrington: I would like to see some consolidation in the market. I would like to see groups of schemes being able to invest in other asset classes, which they are not doing so much at the moment, for example, infrastructure – the kind of business that has annuity type incomes, for example, Camelot in my own constituency, which is owned by Ontario Teachers’ Pension Fund. I cannot understand why a scheme thousands of miles away has got a nose in, when it is surrounded by our own pension schemes and I am asking questions. I would think institutional residential letting would be ideal. I would like to find ways of getting schemes investing in those. I am not talking about casino stuff, high risk stuff.
Hawthorne: Do you have any plans to change the triple lock on pensions?
Harrington: We are wedded to that until 2020. It is a clear commitment to 2020. If, as people say, inflation is going to rise, the triple lock will become more academic, as people will be protected by inflation and earnings.
Hawthorne: Would you like to see a single regulator for both occupational pensions and personal pensions?
Harrington: There was talk about it some years ago. We have plenty of irons in the fire on what we are doing. I am sure it will be looked at again in the future. There are compelling arguments both ways. I think first things first. At the moment, there is a lot going on with auto-enrolment, which is probably one of the biggest projects ever in the pensions world. Then we have pressure on DB schemes, some of which, at the worse end, the Regulator is looking into.
Hawthorne: How are plans to toughen up the regulation of master trusts progressing?
Harrington: The Pension Schemes Bill is being introduced in Parliament tomorrow, which is basically a consumer protection bill to regulate master trusts much in the same way as other pensions. There is also something on exit charges.
Hawthorne: Is there any hope for the WASPI women?
Harrington: I made it very clear that our position is that we have made the concessions we are going to make – that does not mean that I am unsympathetic to the women involved, but we have made a £1.25bn concession. We have looked at every alternative and they are either unaffordable or not legal at the moment and would require primary legislation, which is a very much more complicated process to get involved in. For women in this position who are living in what has been described as desperate circumstances, I would say there is the benefits system. This is often forgotten about. Women are now working on average until 63.5 years. Ironically, I am afraid we would get to a stage where legal advice says it is discriminatory and that men could say they have been treated unequally. It would not be right to give your readers false hope. The government really will not change. This is it now.
Hawthorne: Will the introduction of the Lifetime ISA harm auto-enrolment?
Harrington: I think it is a useful product to help with home ownership. I don’t think it competes in any way with pensions. I suppose there are two big steps in most people’s lives – the first when they purchase their own property and the second when they retire. I think it is right that the government should help with both things, which they do through the tax system. Obviously, the big difference is that the Lifetime ISA is more short term and the employer is not really involved in it, but both involve long term saving. The government’s policy is to try and promote that.
Stephanie Hawthorne has been editor of Pensions World since 1989. An honours law graduate of King's College, London and winner of 10 first and second prizes for pensions, property and insurance journalism, Stephanie has been a journalist for 25 years. Starting her financial career as a researcher/marketing specialist for a national independent financial adviser and subsequently a leading life office, she then moved on to Insurance Age, Planned Savings and Financial Times' Money Management (deputy editor). Stephanie has contributed articles to the Financial Times, Mail on Sunday, The Times, The Sunday Times, The Sunday Telegraph and The Observer, as well as numerous magazines. Among her other editorships are Counsel: The Journal of the Bar of England and Wales (from 1997 to 2007) and Charity World (managing editor, 1993 to 1997).