Source · Select Committees · Public Accounts Committee
Recommendation 3
3
HM Treasury has not done enough to ensure people understand the value of their pensions.
Conclusion
HM Treasury has not done enough to ensure people understand the value of their pensions. This Committee previously recommended, in 2011, that HM Treasury should work with employers and pension schemes to ensure that clear and relevant information is provided to employees on the value of their pensions. But limited progress has been made and more needs to be done to improve employees’ 6 Public Sector Pensions understanding. The problem has been exacerbated with further complexities being introduced as a result of government’s response to the McCloud judgment. HM Treasury provided us with data that implies that over 238,000 employees have opted out of their pensions, but it does not have a clear understanding of why they do so and whether some groups are more likely to opt out – it is particularly concerning if younger and lower paid employees are more likely to opt out. There are understandable reasons why people may choose to opt out of pension schemes for example, owing to short-term spending priorities, but inadequate pensions are likely to cause issues in the future and push costs into other policy areas, such as if people are more likely to be reliant on the benefits system. Recommendation: HM Treasury should lead from the centre, and seek to understand members’ views regarding their pensions, including the reasons why people may opt out of a scheme and whether this has a long-term impact on other parts of public services and expenditure. It should undertake a review into the take- up and retention of public pensions, particularly amongst young professionals, to help understand the issues employers face when trying to demonstrate the value of pensions. Such a review should identify areas where communication is working well and recommend best practice for employers.
Government Response
Acknowledged
HM Government
Acknowledged
3.1 The government agrees with the Committee’s recommendation. Target implementation date: March 2022 3.2 Participation in the main public service pension schemes are very high. For example, less than 1% of the active Civil Service population has currently opted out of the Civil Service Pension Scheme. 3.3 Data on participation rates in public service pension schemes are collected and held at scheme level and shared with HM Treasury. This is appropriate given that departments are responsible for schemes and controlling membership data. If participation rates change significantly, departments are expected to raise this with HM Treasury and implement appropriate mitigation measures. For example, some departments have implemented exit surveys to understand why employees have opted-out of their pension scheme. 3.4 HM Treasury will commission departments for analysis of latest participation data and will work with departments to standardise data collection, including whether data can be broken down by member characteristics. HM Treasury will also ask departments to provide an update on the measures being taken to improve participation among specific groups, which will be used to inform ongoing work by HM Treasury and departments to promote the value of public service pensions among employees. Departments should also continue to provide HM Treasury with participation data on a regular basis for monitoring purposes. 3.5 Public service pension schemes provide members with generous benefits in retirement. As participation rates in these schemes remain high, HM Treasury does not believe that participation levels will have a significant impact on wider public expenditure. However, HM Treasury will keep this under review.