The Week In Pensions provides you with a digest of the most important developments in pensions law and regulation along with highlighting some of the most interesting stories from the pensions industry and national press.
In The Week In Pensions this week:
- Government confirms plans to increase the minimum pension age to 57 from 2028;
- PLSA consultation response highlights key concerns regarding Regulator’s proposed “one size fits all” fast track and bespoke approaches; and
- PDP to publish initial data standards for dashboards by the end of 2020.
And, in the pensions industry and national press:
- Increased employer contributions likely following McCloud ruling;
- DC master trust pension pots recover as younger members see returns of 15%; and
- Australia’s ‘super’ pension system risks being drawn into its culture wars
Pensions legal and regulatory developments
Government confirms plans to increase the minimum pension age to 57 from 2028
John Glen MP, the Economic Secretary to the Treasury, has confirmed the government’s plans to increase the minimum pension age to 57 from 2028. Mr Glen’s gave a written response to a parliamentary question on plans to increase the minimum pension age.
In this, he confirmed that the government’s original plans (as set out in the government’s response to its consultation ‘Freedom and choice in pensions’ (July 2014). This means that the minimum pension age will increase from 55 to 57 from 2028, alongside planned increases in the State Pension age to 67. From then on, the minimum pension age in the tax rules will remain ten years below State Pension age.
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PLSA consultation response highlights key concerns regarding Regulator’s proposed “one size fits all” fast track and bespoke approaches
In its recent response to The Pensions Regulator’s consultation on the DB funding code of practice, the Pensions and Lifetime Savings Association (PLSA) has expressed its concerns regarding the impact of the Regulator’s proposed approach on pension schemes.
One of its key concerns is that ‘expecting schemes of all different sizes, covenant strengths and maturity levels to adhere to rigid investment approaches, technical provisions and recovery plans, will be inappropriate for many scheme-specific long-term objectives and may ultimately be detrimental to scheme members’ outcomes.’ As a result, the PLSA is pushing for flexibility in a range of fast track options.
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PDP to publish initial data standards for dashboards by the end of 2020
Following the closure of its call for input on data standards, the Pensions Dashboards Programme (PDP) has announced its intention to publish an initial version of the data standards by the end of 2020.
In an initial response to its call for input, Richard Smith (Head of Industry Liaison on the PDP), stated that: ‘by the end of the year, we will be publishing the first version of data standards for subsequent user testing. This means that pension schemes and providers can begin to act in earnest.’
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Highlights from the pensions industry and national press
Increased employer contributions likely following McCloud ruling
Public sector employer pension contributions are likely to increase to cover the “expensive” implementation of the McCloud ruling, according to Gowling WLG. Pensions Age has picked up the Insight written by Hannah Beacham and Paul Carberry and focused on the suggestion that increased employer contributions could lead to a rise in proposals to change pension scheme provision from employers that find participating in the main public sector schemes or Local Government Pension Scheme (LGPS) less attractive.
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- Click here for the full story from Pensions Age ‘Increased employer contributions likely following McCloud ruling – Gowling’; and
- Click here for the full text of our Insight ‘What do the McCloud remedies consultations mean for public sector employers and contractors?’
DC master trust pension pots recover as younger members see returns of 15%
Defined contribution (DC) pension savings of younger master trust members rose by an average of 15% during the second quarter of 2020, recovering most of the losses seen in the previous quarter, according to new analysis by Isio.
Isio’s review analysed the performance of a selection of the leading master trusts default strategies, revealing that younger members (around 30 years from retirement) benefited most from the recent market boost, with pot sizes increasing between 10.5% to 19.9% over the second quarter of 2020.
Late-career members (i.e. those with two years until retirement) had also recovered much of their losses from the first quarter of 2020, with an average return over 9%, and longer-term returns averaging 4.3% per annum.
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Australia’s ‘super’ pension system risks being drawn into its culture wars
Australia’s A$2.8 trillion (£1.56 trillion) superannuation industry is, according to the Financial Times, facing the biggest challenge in its history. Longer life expectancy and persistent low interest rates are putting pressure on retirement schemes the world over.
In Australia, the government has increased the pressure by changing the rules to allow workers to dip into their “super” to help see them through the COVID-19 recession. This has already resulted in approximately A$32 billion (£17.9 billion) being removed from the superannuation system. The system also reported the first fall in net contributions in its near 30-year existence in the second quarter of 2020.
The Australian government has now suggested that it may block a legislated increase in employer pension contributions. These were due to rise from from 9.5% currently to 10% in 2021 and 12% by 2025. Of greater impact for the success of the savings scheme, some are now arguing that superannuation should become voluntary for Australians earning less than A$50,000 to give people more control of their money.
As one of the main inspirations for the UK’s workplace pension reforms and automatic enrolment, these developments will be watched closely in Whitehall.
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Ian Chapman-Curry
Ian is a London-based professional support lawyer (PSL) legal director. Ian is a member of our pensions and combined human resource solutions (CHRS) teams. He works with clients to solve their employment and pensions law issues. Ian maintains a particular focus on 'crossover' issues that benefit from his understanding of both areas of law.