"From a heavily trailled announcement in the Autumn and talk of a new ‘legal right’, today’s Budget simply talks about ‘exploring’ the idea, and needing to be sure first that it would improve things for savers."
- Steve Webb, partner at LCP and former pensions minister
The Budget speech and supporting documents indicate that the Government is starting to cool on the idea of a ‘lifetime’ pension provider, as originally promoted in the Autumn Statement.
In the Autumn Statement speech, the Chancellor talked of consulting on a ‘legal right’ for people to divert their pension savings to a pension provider of their choice. But in the Budget paperwork, the Government now says that it is simply committed to ‘exploring’ the idea. It also says that it will only do this if it can ‘ensure’ that this will produce better outcomes.
Budget documents state: “The government has confirmed that it remains committed to exploring a lifetime provider model for Defined Contribution (DC) pension schemes in the long-term. The government will undertake continued analysis and engagement to ensure that this would improve outcomes for pension savers, and build on the foundations of reforms already underway, including the Value for Money Framework.”
Commenting, Steve Webb, partner at LCP and former pensions minister, said: “It is welcome to hear the first signs that the Government is thinking again about the idea of breaking up the current model of workplace pensions and replacing it with a ‘lifetime provider’ model. From a heavily trailled announcement in the Autumn and talk of a new ‘legal right’, today’s Budget simply talks about ‘exploring’ the idea, and needing to be sure first that it would improve things for savers. Once we see the full consultation response, where there was overwhelming opposition from consumer groups and industry experts, it is to be hoped that this idea will now be quietly dropped.”
Kate Smith, head of pensions at Aegon, commented: "It’s right that the Government has decided to be more cautious before racing ahead with the pot for life model. We believe there’s a lot more thinking to be had, including exploring how employers would react if they were removed from the heart of pension saving.
"Most employees are simply not equipped to make the decision to choose their own pension scheme and unless the right protections are put in place, this could mean poorer member outcomes for many."
David Piltz, CEO at Gallagher's UK benefits and HR consulting division, added: “If implemented correctly, it is true that the proposals have the potential to enhance pensions engagement.
“The proposals could allow individuals to have more visibility and control over their wealth. By transforming accumulations of ‘small pots’ into one large pot using the lifetime provider model, the initiative could bring simplicity to pension schemes, evoking an increased sense of ownership for individuals.
“However, we need more clarity on how this will work in practice, given that the proposal requires intensive planning and poses high risks if not implemented well. Careful consideration needs to be taken when building the required infrastructure for the initiative, and the government must not underestimate the magnitude of this job, nor the importance.”
