Recommendations & Conclusions
33 items
1
Conclusion
Fifth report - Protecting pension saver…
The pension freedoms gave people the freedom to choose what to do with their money. On balance these changes have been a success and we do not want to see them rolled back. However, many savers need more support than they currently receive in order to make good decisions about …
Government response. The government is fully committed to providing savers with the relevant information and support in order for them to make appropriate decisions when they access their pension. Until we know more about what is already on offer and the expectations …
Department for Work and Pensions
2
Recommendation
Fifth report - Protecting pension saver…
Making pensions decisions is complicated. The continued movement from DB to DC, together with auto-enrolment and the increased number of jobs that one person will have over a working lifetime, mean that without intervention decision-making will become more complicated still. The Government and regulators have a role to play in …
Government response. The Pension Commencement Lump Sum (PCLS) forms part of tax policy and any changes are for the government to consider, rather than the regulators. The government’s overriding objective in providing generous tax relief for individuals to build up pension savings …
Department for Work and Pensions
3
Conclusion
Fifth report - Protecting pension saver…
The Minister for Pensions told us that the Department for Work and Pensions is trying to make pensions simpler. We support this principle. But simplicity alone is not enough to improve outcomes for savers. The Government and regulators will either need to increase saver engagement—encouraging and enabling savers to make …
Government response. We understand that MaPS and the FCA will be responding to this recommendation separately.
Department for Work and Pensions
4
Recommendation
Fifth report - Protecting pension saver…
People can usually take up to 25% of their pension as a tax-free lump sum. This is one of the most well-known UK pension policies and leads to many people who access their pensions for the first time taking poor decisions about the remaining 75%. We heard persuasive arguments both …
Government response. We welcome the Work and Pension Select Committee’s interest and support for the work we are taking forward to explore the ways in which CDC provision might be extended beyond the single or connected employer schemes we are currently legislating …
Department for Work and Pensions
5
Conclusion
Fifth report - Protecting pension saver…
We were told that most savers want a reliable income in retirement. Annuities provide this for savers with defined contribution pensions, but have dramatically fallen in use since the introduction of pension freedoms. The transition from defined benefit schemes to defined contribution schemes means that fewer people will have occupational …
Government response. TPR has recently published the code of practice for CDC pension schemes for consultation. They will also look to publish guidance as appropriate to support trustees. Whilst the code of practice is primarily for trustees, they think that the code …
Department for Work and Pensions
6
Conclusion
Fifth report - Protecting pension saver…
Many more people than currently do, however, would benefit from making greater use of the pension freedoms by choosing a mix of annuities, lump sums and drawdown Protecting pension savers—five years on from the Pension Freedomss Accessing pension savings 61 rather than a single product. For example, a person may …
Government response. We understand that the FCA will be responding to this recommendation separately. Supporting decision making at the point of access
Department for Work and Pensions
7
Conclusion
Fifth report - Protecting pension saver…
Hybrid products which provide a ready-made mix of lump-sums, drawdown and annuities can be complicated and costly. We believe that a personalised mix of retirement products would better meet the needs of savers. However, these options will be difficult for savers to choose themselves without thorough guidance and most savers …
Government response. The principle of joint consultations, where appropriate, underpins the work of TPR and FCA and the Department supports this goal wherever opportunities permit. Since the publication of their joint strategy, TPR and the FCA have worked more collaboratively in exploring …
Department for Work and Pensions
8
Recommendation
Fifth report - Protecting pension saver…
We recommend that the Money and Pensions Service and the Financial Conduct Authority should develop proposals to increase the number of people choosing a mix of retirement products—including cash, drawdown and deferred annuities—to meet their changing needs at different stages of later life.
Government response. We acknowledge at present that there is little information on the decumulation products providers offer in the trust-based marketplace. There is also little evidence of engagement with members about the level of support they would want from their pension provider. …
Department for Work and Pensions
9
Conclusion
Fifth report - Protecting pension saver…
The Pension Schemes Act 2021 enabled collective defined contribution (CDC) schemes, which provide retirement incomes from a collective fund. The income from the fund received by members varies depending on how the fund performs. There is demand for the further development of CDC schemes in future and it is therefore …
Government response. We understand that the FCA will be responding to this recommendation separately. Government and Financial Conduct Authority Responses to the Committee’s Fifth Report 9
Department for Work and Pensions
10
Recommendation
Fifth report - Protecting pension saver…
The Royal Mail CDC scheme is likely to be the first of its kind under the Pension Schemes Act 2021. We anticipate other employers and organisations will want to learn from this scheme. We recommend that the Government publishes a framework for assessing the success of this and other early …
Government response. The Government does not support setting a goal for the combined use of Pension Wise and paid-for advice when accessing pots for the first time. However, in light of Tom McPhail’s 2021 Departmental Review of MaPS, we are encouraging MaPS …
Department for Work and Pensions
11
Recommendation
Fifth report - Protecting pension saver…
We recommend that the Pensions Regulator works with the Royal Mail to develop a toolkit for other employers looking to set up similar schemes.
Government response. We disagree with the proposal to automatically book Pension Wise appointments. We believe that there are significant issues with this approach, both at age 50 and at the point of first access. It is important to note that Pension Wise …
Department for Work and Pensions
12
Recommendation
Fifth report - Protecting pension saver…
For CDC schemes to provide a realistic alternative to annuities, people with defined contribution pension pots need the option to be able to transfer to decumulation- only CDC schemes. In future these may be available through master-trusts regulated by the Pensions Regulator. We recommend that the Financial Conduct Authority consider …
Government response. We will consider this recommendation in more detail. DWP is part funding, and sits on the steering group of, a Pensions Policy Institute DC data project to provide individual-level data of pension provision across a number of Automatic Enrolment schemes; …
Department for Work and Pensions
13
Recommendation
Fifth report - Protecting pension saver…
Measures are in place for contract-based schemes to offer investment pathways, but equivalent measures are some way off for trust-based schemes and their final form may differ. This is not an isolated case of different measures being in place for contract-based and trust-based schemes without a clear rationale. We are …
Government response. The government recognises the importance of enabling people to make the right financial decisions at all stages in their lives. HM Treasury works closely with the FCA to ensure that the financial advice market works well, competitively and fairly for …
Department for Work and Pensions
14
Recommendation
Fifth report - Protecting pension saver…
The Department for Work and Pensions and the Pensions Regulator are developing proposals for equivalent measures to investment pathways for trust-based schemes. We recommend that investment pathways should have the same form for contract- based and trust-based schemes.
Government response. The government believes that individuals should be trusted with their own hard-earned savings and have a choice about how to access their pension income. The government introduced the Pensions Advice Allowance (PAA) in 2017 in response to the Financial Advice …
Department for Work and Pensions
15
Recommendation
Fifth report - Protecting pension saver…
There is a charge cap for savers who default to a scheme through auto-enrolment. We recommend that there should be a similar charge cap for non-advised savers choosing a decumulation product through investment pathways. The Financial Conduct Authority should report on this as part of its upcoming review on investment …
Government response. We understand that the FCA will be responding to this recommendation separately.
Department for Work and Pensions
16
Recommendation
Fifth report - Protecting pension saver…
Pension Wise is a well-regarded but under-utilised service. The pension freedoms will be seen as a failure if savers make poor decisions without receiving the guidance they were promised when the freedoms were introduced. The Minister for Pensions and Financial Inclusion’s previous agreement that having a Pension Wise appointment should …
Government response. The Money and Pensions Service provides tailored guidance to individuals, based upon the information they provide. For instance, MoneyHelper Pensions (previously known as The Pensions Advisory Service), already provide specialist pensions and divorce appointments and pension rebuild appointments for people …
Department for Work and Pensions
17
Recommendation
Fifth report - Protecting pension saver…
The “stronger nudges” towards guidance being proposed by the Department for Work and Pensions and the Financial Conduct Authority will not be enough to make receiving pensions guidance the norm. The Money and Pensions Service told us that it would support a trial of automatic Pension Wise appointments and we …
Government response. TPR and the FCA promote the tools available from MoneyHelper in their employer and trustee guide on providing support to members on financial matters. They will continue to work with partners to explore ways to promote the tools and guidance …
Department for Work and Pensions
18
Recommendation
Fifth report - Protecting pension saver…
Many savers have multiple pension pots with different providers and schemes. At the moment, it is not possible for providers and regulators to aggregate data on individual savers, rather than individual pension pots. This makes it more difficult to ensure that savers are getting the advice they need. We recommend …
Government response. The Government agree that digital tools have an important role to play in the delivery of guidance and encourage MaPS to go further in developing its digital offer. MaPS currently offer a self-serve digital journey, alongside digital tools such as …
Department for Work and Pensions
19
Recommendation
Fifth report - Protecting pension saver…
Advice is a personalised recommendation that can only be provided by a regulated firm at a cost. Few people seem to be willing to pay for financial advice for the decisions they make about their pension savings—even though doing so could significantly improve their financial situation. More people would benefit …
Government response. It is important to establish trust in dashboards as they are introduced, and until they are, that transactions should not be enabled. We have taken the position that they will start with a basic level of information, with the potential …
Department for Work and Pensions
20
Recommendation
Fifth report - Protecting pension saver…
The Pension Advice Allowance allows £500 to be withdrawn from a pension up to three times in different tax years for advice. Either because of a lack of awareness or lack of demand the policy is not working. Its design has made it unusable by most savers. We believe that …
Government response. The growth in the number of deferred small pots in the automatic enrolment (AE) market and the impact on the consumer is an issue the government is determined to address. Our aim is to make the consolidation of deferred small …
Department for Work and Pensions
21
Recommendation
Fifth report - Protecting pension saver…
The line between advice and guidance is a continuing issue of debate. There is demand for both enhanced guidance and limited advice, but there is reluctance from the industry to operate too close to the advice/guidance boundary and resistance to such services being offered by the Money and Pensions Service, …
Government response. Individuals wishing to use dashboards will be able to delegate access to MaPS guiders or authorised financial advisers who have the relevant permissions under the Financial Services and Markets Act 2000 to advise on investments or conversion or transfer of …
Department for Work and Pensions
22
Recommendation
Fifth report - Protecting pension saver…
We recommend that the Money and Pensions Service offers enhanced guidance, under our proposed definition, through its pensions services. We also recommend that the Money and Pensions Service establishes an industry group to develop best practice proposals and templates for offering enhanced pensions guidance.
Government response. We want to ensure that people have a general awareness of pensions, know about the importance of planning for retirement, and have access to the information they need to do this. We welcome the industry led campaign for Pensions Engagement …
Department for Work and Pensions
23
Recommendation
Fifth report - Protecting pension saver…
Pension savers will often look first to their scheme or employer for support when making decisions about their pension savings. Schemes and employers should play an active role in providing guidance and signposting advice to their members and employees. Many large schemes and employers already do this. We recommend 64 …
Government response. The department is working closely with the Money and Pensions Service, supported by the wider Mid-life MOT Board, to test both the most effective format(s) for Mid-life MOTs and the most efficient delivery route for Mid-life MOTs, building on the …
Department for Work and Pensions
24
Conclusion
Fifth report - Protecting pension saver…
Most guidance is currently delivered by individuals, which is costly, or through written communication, which is unengaging. In future we envisage a significant proportion of guidance or triage services will be delivered through digital tools. This should be a key consideration in the implementation of the recommendations we have made …
Government response. The government acknowledges the benefits of timely and thorough consultation, and in achieving cross-party consensus where possible about the matters being legislated upon. As announced in 2014, the NMPA will rise to 57 in April 2028 but those who have …
Department for Work and Pensions
25
Conclusion
Fifth report - Protecting pension saver…
Pensions dashboards will let people see all of their pensions on a digital platform. This has the potential to be the most influential policy in helping people take good decisions when they first access their pension pots. To be successful, pension dashboards will need correct and up to date data …
Government response. The government agrees with the Committee that pensions dashboards offer a significant opportunity to transform how savers interact with their pensions. Pensions Dashboards will provide consumers with online access to their pension savings information on request, and with their permission, …
Department for Work and Pensions
26
Recommendation
Fifth report - Protecting pension saver…
When pension dashboards launch it will not be possible to undertake any transactions through them. We understand why some people are calling for transactions to be facilitated through pension dashboards. However, with dashboards a long way from reality and a need to build trust in the system, we recommend that …
Government response. Individuals wishing to use dashboards will be able to delegate access to MaPS guiders or authorised financial advisers who have the relevant permissions under the Financial Services and Markets Act 2000 to advise on investments or conversion or transfer of …
Department for Work and Pensions
27
Conclusion
Fifth report - Protecting pension saver…
Many savers will have built up a number of small pension pots, which would benefit from consolidation. However, the issue of small pension pots cannot be solved simply by encouraging savers to change their behaviour to proactively consolidate their small pension pots. The Committee would expect to look closely at …
Government response. The department is working closely with the ABI/PLSA-led industry coordination group which is actively progressing the necessary detailed work and feasibility analysis on this to inform consolidation solutions and the underpinning administrative systems – including the parameters governing small pots …
Department for Work and Pensions
28
Recommendation
Fifth report - Protecting pension saver…
Pensions dashboards will change how people engage with their pension savings. Dashboards will also provide an important additional tool which can be used by those providing guidance or advice to savers. We recommend that the Money and Pensions Service should develop a guidance service—possibly a future iteration of Pension Wise …
Government response. Individuals wishing to use dashboards will be able to delegate access to MaPS guiders or authorised financial advisers who have the relevant permissions under the Financial Services and Markets Act 2000 to advise on investments or conversion or transfer of …
Department for Work and Pensions
29
Conclusion
Fifth report - Protecting pension saver…
The simpler annual pension statement will require schemes to show information to members in a consistent way across the industry. We welcome the simpler annual pension statement and believe it will be particularly beneficial to people with many pension pots.
Government response. We have recently introduced Regulations to make Annual Benefit Statements for defined contribution schemes used for automatic enrolment much simpler and easier for members to understand. This will help increase engagement with pensions, and prompt people to seek further information …
Department for Work and Pensions
30
Recommendation
Fifth report - Protecting pension saver…
A pension statement season would be a short period each year when schemes were required to send savers annual pension statements. We are not convinced that the gains from a statement season will justify the complexity of introducing it. In our view, the measure is at best a stopgap until …
Government response. We want to ensure that people have a general awareness of pensions, know about the importance of planning for retirement, and have access to the information they need to do this. We welcome the industry led campaign for Pensions Engagement …
Department for Work and Pensions
31
Recommendation
Fifth report - Protecting pension saver…
The midlife MOT is free support for people in their 40s, 50s and 60s to make plans about work, wellbeing and money. We welcome the principle of a midlife MOT, but believe that the policy is not yet providing the support envisaged for most savers. For the “my money” part …
Government response. The department is working closely with the Money and Pensions Service, supported by the wider Mid-life MOT Board, to test both the most effective format(s) for Mid-life MOTs and the most efficient delivery route for Mid-life MOTs, building on the …
Department for Work and Pensions
32
Recommendation
Fifth report - Protecting pension saver…
We support the Government’s intention to make pensions simpler. Recent policy changes to the normal minimum pension age have highlighted the difficulties of achieving this and we are disappointed that these changes have made making decisions about accessing pensions even more difficult. Savers take a working lifetime to build up …
Government response. The government acknowledges the benefits of timely and thorough consultation, and in achieving cross-party consensus where possible about the matters being legislated upon. As announced in 2014, the NMPA will rise to 57 in April 2028 but those who have …
Department for Work and Pensions
33
Recommendation
Fifth report - Protecting pension saver…
The Government, regulators and the Money and Pensions Service are introducing multiple policy interventions to support the pension freedoms. Six years on there remains no framework against which to evaluate the success of the freedoms or make judgements about the need for—or effectiveness of—support interventions. Our predecessor Committees have asked …
Government response. The government is fully committed to providing savers with the relevant information and support in order for them to make appropriate decisions when they access their pension. Until we know more about what is already on offer and the expectations …
Department for Work and Pensions