2019: another interesting year for pensions?

2019 promises to be another interesting year for pensions (when is a year not interesting in pensions?). We’ve been promised a Pensions Bill that will cover Defined Benefit, Collective Defined Contribution (CDC) and the Pensions Dashboard. And we see auto enrolment move into steady state (for now) with contributions getting to 8% in April (well sort of 8%.... given band earnings).

While a Pensions Bill is welcome, I would also call on the Government to use the opportunity to press ahead with implementing some of the conclusions of its auto enrolment review. The removal of band earnings and lowering the qualification age are two aspects where it would be a sensible step to press ahead and keep up the momentum in terms of getting more people saving more for retirement. I’d also like to see the Government use the opportunity of the Bill to look at tackling the small pots issue. It makes no sense for individuals to have micro pots scattered around and, while the dashboard will help people aggregate and keep track, I think we need to either have some auto consolidation of micro pots using the infrastructure created by the dashboard and/or just simply allow people to cash these out. I’m talking micro pots here, so probably less than, say ￡100. These are uneconomic and it does the member no favours to have pots of this size floating around.

The development of proposals on CDC genuinely excites me, and if the legislation enabling that gets on the statute book that will be regarded as a significant achievement in the development of our pension system. Over time, I think this could allow further innovations in sharing risk and, while the current consultation is focussed on a particular type of CDC, it sets the tone for the future in terms of moving away from thinking solely in terms of defined benefit and defined contribution.

The dashboard will be a key focus for 2019, and, who knows, we may even have our first dashboard up and running! While progress to date has been frustrating, I think the new DWP consultation is an opportunity to set the tone and really get cracking with delivery. There’s a tough balancing act for government in pleasing everyone on the dashboard, but I would hope that the infrastructure that is developed learns lessons from open banking and is based on new, not old, approaches and technology. Importantly, it needs to build in the space to innovate.

Last, but not least, 2019 will also be the year that master trusts will find out whether or not they have received authorisation from TPR. This is already leading to a market shake out, and I think we’ll see further consolidation in 2019, both in the master trust space, but also in the single employer trust space.

Oh yeah, nearly forgot... and, of course, there’s also tax relief... no doubt we’ll have more speculation throughout 2019 about reform. It will happen, it’s simply a case of when. And it would be great news all round if the Treasury and HMRC could finally deal with what's known as the net pay anomaly that disadvantages lower earners.

So 2019 promises to be another interesting 12 months in the development of our pensions system. We have come a long way over the past few years, but there is still much more to do to create a pensions system that can really deliver for all savers.