It came as no great surprise last week when the Pensions Minister, Baroness Ros Altmann, announced that: “the time is not right to implement Defined Ambition, Collective Benefits and Automatic Transfers“. It is a case of too much too soon, but will there ever be a right time?
The Government’s written statement clarifies its intention to give priority to the successful implementation of the State Pension reforms next April, the roll-out of the auto-enrolment regime and the pension freedom reforms which were introduced earlier this year to give savers more flexibility on how and when they withdraw their pension savings. It concludes that now is not the right time to ask the pensions industry, employers and savers to absorb the further regulation that would be necessary for Defined Ambition, Collective Benefits and Automatic Transfers to work effectively.
The automatic transfer reforms were proposed to make it easier for people to take their workplace pension savings with them when they change jobs – small pension pots (less than £10,000) in auto-enrolment DC pension plans would be automatically transferred to a new employer’s pension arrangement. However, the introduction of an automatic transfer regime is complicated to develop and costly to implement, especially for those pensions providers and trusts that were facing phase 1 implementation next October.
The new savings plans, namely collective benefits (i.e. CDC which allows thousands of employees to combine their savings into one large pot) and defined ambition (where employers guarantee at least part of an employee’s income on retirement) are complicated pieces of legislation. So complicated in fact that former Pensions Minister, Steve Webb, struggled to explain it to Parliament, at one stage saying: “I am going to persevere with this [explanation] if it kills me.”
Speaking at the NAPF (now the Pensions and Lifetime Savings Association) annual conference on 15 October, the Pensions Minister made it clear that these reforms were only put on hold stating that: “This isn’t abolished, this isn’t abandoned, this is on hold for the moment because of all the other changes going on.” She indicated however that it is unlikely that any regulations would be in place before 2018.
The decision to delay these reforms has been largely (but not universally) welcomed. However, the delay will at least:
- give the pensions industry a little breathing space whilst it continues to absorb and implement freedom and choice, and whilst it prepares for the abolition of defined benefit contracting-out; and
- allow the 1.8 million employers who have yet to implement automatic enrolment the opportunity to deal with one major pensions issue at a time.