The chair of the work and pensions committee says new government plans come years of pain—and thousands of dashed retirement plans—too lateby Frank Field / March 4, 2019 / Leave a comment
Published in April 2019 issue of Prospect Magazine
Work and Pensions Secretary Amber Rudd. Photo: REX SHUTTERSTOCK The Department for Work and Pensions has announced that it will be a criminal offence, with the possibility of serious jail time, for directors to wilfully or recklessly risk their company pension scheme. While this is a hugely welcome move, especially so early in Amber Rudd’s tenure, it does raise the perennial question: when will this policy begin to work? The answer: years of pain and tens of thousands of dashed retirement plans too late. The Work and Pensions Committee, which I chair, made concrete calls for much tougher regulation of defined benefit pensions in its joint BHS inquiry nearly three years ago, in our report on the pensions regulator, pension protection fund (PPF) and wider pension regulation two years ago—and again in our Carillion joint inquiry one year ago. Whenever the committee questions regulators, they insist they have all the powers they need and are doing their jobs properly. The reality looks very different: the ruin of BHS and Carillion with immeasurable costs; the Kingman Review which exposed the many shortcomings of the audit regulator; or the scandal at British Steel, where pension scheme members were targeted by “vulture” financial advisers. Meanwhile, Philip Green—clearly inspiration for this new law—has seemingly got away scot-free, eventually brought, at further public expense, to an out-of-court settlement that saw him contribute no more (and possibly less) than he should have put into the BHS pension scheme in the first place. We are still waiting to learn the fate of the directors of Carillion, one of whom dismissed contributions to its pension schemes as a “waste of money.” Now those schemes are set to dump a near £1bn pound hit—the biggest ever— on the levy-funded PPF. “Whenever we question regulators they insist they are doing their jobs properly. The reality looks very different—see the ruin of BHS and Carillion” This overall catastrophic loss arises from defined benefit schemes, now on the decline. The new frontier is 10m new savers’ pension pots created through automatic enrolment. Yet a great challenge already is keeping the money in these fledgling savings pots. Almost a year ago, we called for a new default “decumulation pathway,” with charges capped at the Financial Conduct Authority’s (FCA) own 0.75 per cent rate. More consultation ensued. There was more consultation too on the opaque and contingent charging structures that we fear incentivise the poor financial advice that can decimate retirement savings. Yet in a recent evidence session the FCA drew a total blank on our questions on the small new auto-enrolment pots already eaten away entirely by costs and charges. Sustainable pensions require sustainable regulation—and regulators. That requires radical change, now. This new offence, when it ever takes effect and if it ever has the desired effect, barely scratches the surface.