The lack of substantial action by the government on pensions governance committees, charges caps, transaction costs and the 2014 Budget reforms all came under attack by shadow pensions minister Gregg McClymont when speaking at the annual National Association of Pension Funds (NAPF) conference in Liverpool.
McClymont warned that the success of rolling out auto-enrolment to the smallest employers next year could be threatened by the flurry of activity currently occurring in the pensions industry, including the reforms announced in this year’s Budget and the new pensions Bill currently going through parliament.
He said: “One or two areas where I think the government is particularly under pressure from myself and my colleagues and from the NAPF and others is taking action in name now, but it hasn’t implemented that action yet. An obvious example is the charge cap, another obvious example is transaction cost.”
He pointed out that, under industry pressure, the government has undertaken action on the disclosure of pension costs.
“But it is not quite as simple as it appears, because what the government has done is give that power to the Financial Conduct Authority (FCA),” he explained. ”But actually the FCA has always had that power of forced disclosure. It has just not chosen to use that power.”
He added: “In those sorts of areas the government must deliver in substance not just in name.”
He also stated that the government is not getting governance right.
“The report into pensions which was undertaken not long ago and which exposed some of the issues in the pensions industry led very quickly to the adoption by the government of independent governance committees, he said. ” ”But the issue there is actually beyond that label – how independent are they and what are they governing?” he asked.
He pointed out that we are unlikely to see value for money in workplace pensions as long as contract-based pension schemes are not governed by trustees with the fiduciary duties acting in the favour of savers.
He said that good governance depends on managing the tension between the duty to shareholders and the obligation to treat customers fairly.
“With governance committees the government is not in the right place. Pension plans of all types must be governed by independent trustees,” said McClymont.
Another of his criticisms was targeted at the 2014 Budget reforms.
“An area where the government has moved dramatically, but not necessary putting in the right checks and balances, is the Budget reforms. It really is pretty striking that so close to the implementation date when all this goes live providers, pensions professionals [and] everyone in the pensions industry is still seeking even the most basic clarity around the way in which these reforms are going to work,” he said.