As older workers champion Altmann steps up to head the DWP, we check industry’s reaction to her appointment
27 May 2015
Out of the wreckage of Liberal Democrats’ losses in the General Election which swept Steve Webb out of office, came the announcement that Ros Altmann would be his successor as the new Pensions Minister. As she was welcomed into the Department of Works & Pensions, she declared that her priorities would be to: “take forward work to bring in the new State Pension, help millions more to be enrolled into good quality workplace pension schemes and safeguard new freedom and choice as to how people can access their savings.”
It had already been announced she would be made a Tory peer, partly as an acknowledgement of her financial fairness campaigning work for the Coalition Government. She picked up a CBE last year also as an acknowledgement of her successful campaigning work including being instrumental in establishing the precursor to the Pension Protection Fund - protecting employees’ pension savings pots should their employer go bust.
Pre-election she had ministerial responsibility for financial consumer protection and financial education with a specific focus on retirees. Before that she was an adviser to Tony Blair on pensions and fund management sectors. She has held senior jobs in the City - working for the likes of NatWest, Rothschild and Chase Manhattan Bank.
There have been calls for her to continue the good work that Steve Webb began. The Centre of Policy Studies research fellow Michael Johnson called for her to “focus on encouraging the rebirth of savings culture.”
In her previous role as consumer protector she championed widening the scope of Pensions Wise to provide guidance to working people of all ages and called for charges caps for all pensions products. She has also called for unlocking of annuities and an end to the Lifetime Allowance (LTA). She has hopes for the setting up of a secondary market for annuities. The IFA sector has already received a shot in the arm from Altmann as last week whilst on BBC Watchdog programme she declared that pension holders with pots of over £30,000 ought to have mandatory financial advice rather than just guaranteed guidance.
We will probably hear on 8th July in George Osbourne’s emergency budget, whether pensions are being officially raided yet again if the LTA is reduced to £1m from next April. Reduction of tax relief for high earners is definitely on the cards also.
But will LTA be scrapped altogether? Ros Altmann’s blog declares against the LTA thus: “With defined contribution schemes, the better policy would be to control the amount put in each year but then allow the pot to grow as well as it can, without penalising it if it rises strongly.” This view is quite well supported by commentators but will the Treasury press on with LTA reductions regardless?
Now that she is firmly inside the tent of power, will she be able to resist the Treasury’s natural desire to tinker with the pensions tax regime to eke out a few billion savings? What do others think she should be doing?
Liberty SIPP’s MD John Fox gave her full backing in an open letter to Ros Altmann. He thinks her thoughts about scrapping LTA made sense and went further to ask her to back 30% flat rate tax relief for all pension savers to encourage more people on lower incomes to save more for retirement.
David Smith of Tilney Best Invest also favours the flat rate tax relief idea. While Tom McPhail weighed in with requests for AE to be extended to the self-employed.
Now Pensions CEO Morten Nilsson outlines six key areas of focus for Altmann in the employer scheme world as follows:
1. Removal of qualifying earning level for AE
2. Ensuring lower earners can access AE
3. Establishing cross-party consensus on automatic transfers
4. Giving consideration to auto escalation levels
5. Extending flexibility to younger generations
6. Making sure AE timetable remains on schedule
It is certainly going to be valuable to stimulate all those auto-enrolees to pay more than the starting amounts which will not be sufficient to assure anything like a comfortable retirement.
Finally, when a recent Professional Pensions regular Pensions Buzz survey asked participants what Ros Altmann’s chief priorities ought to be; the top two by some margin were #1 – Increasing saving rates and (narrowly) #2 getting auto-enrolment implemented successfully across smaller businesses.
The general consensus is that her appointment is good news for the industry because she knows the brief very well and her deep interest in the space may lead her to be prepared to remain in post a little longer than many of Steve Webb’s predecessors. The value of continuity in this complex and ever-changing market is not to be under-estimated.