09 June 2015

Election victory and Second Line of Defence

Election victory promises more of the same

With the announcement of a Conservative majority no doubt still ringing in his ears, David Cameron acted quickly to plug the gap left by the defeated Steve Webb with the appointment of Ros Altman as pensions minister.

Although not an MP, Ms Altman has been made a Conservative peer in order for her to take up the post.

An investment banker by trade, Altman is a fearless campaigner for pensioners' rights and a frequent media commentator.

Industry reaction to her appointment has been mixed. While Steve Webb was broadly accepted by pensions people as well-meaning, courageous and realistic, only time will tell what Altman's tenure will bring.

Certainly the government's pension reforms will continue at pace and she is widely expected to support the introduction of new rules making it possible for pensioners to sell their annuities - although there will still be many practical obstacles to be overcome.

However it's not so clear what will happen to Webb's other big initiatives:

  • Pot follows member
  • Defined ambition schemes
  • 30% flat rate tax relief

Meanwhile the chancellor announced there will be a special budget in July, when we expect confirmation of the Conservative's manifesto pledge to reduce the annual allowance for high earners. As the proposal stands, for every pound earned above £150,000 the allowance may reduce by 50p to £10,000 for anyone earning £210,000 or more.

Ros Altman has always campaigned for low charges and value for money for consumers, and the Department for Work and Pensions (DWP) has already committed to reviewing the 0.75% auto-enrolment charge cap in 2017 - but will there be pressure to do this sooner? Investment transaction costs will need to be disclosed to trustees and investment governance committees from 2016, and the industry is currently debating the best way to achieve this with the DWP and Financial Conduct Authority (FCA).

Finally, there has also been pressure from the opposition to introduce a cap on drawdown charges so charges are likely to continue to feature strongly on the government's agenda for some time to come.

Change, indeed, is the only constant.

Second line of defence

Responding to the FCA's demand for a second line of defence before pension benefits are taken, we've put in place a system to help members make informed decisions.

Our process involves an online questionnaire for the customer that has risk warnings tailored to the options selected. It must be printed off then signed and returned before we can proceed with the transaction. Members without online access can be sent a hard copy.

While acknowledging that for some customers this may appear to be a further obstacle to accessing their funds, we must reassure claimants that we are acting in their best interests.