Key issues for the pension sector in 2018
There is never a dull moment in the world of pensions and in this blog we look at what we believe will be key issues for the pension sector in 2018.
2017 saw numerous consequences of the government pension reforms of 2015 bed in. One unintended consequence appears to have been an increase in pension scams. The Work and Pensions Select Committee has expressed grave concern about this, as indeed have many in the industry.
This year, we are sure that even more pressure will be placed on government to ban cold calling sooner rather than later. Committee Chair Frank Field said that every day without a ban, people are being conned out of their life savings. Will the government fast track the legislation and give pensions advice the same status as mortgage advice which is protected by law? Possibly, but with Brexit looming even larger, we doubt they will have the time or the inclination.
And we are as fed up of the B word as everyone else, but at the time of writing, we are no further forward in understanding what the UK response is going to be to the EU demands on pension liabilities – around £6.25 billion. And, of course, the markets, and the business environment, will continue to be affected by the ongoing uncertainty- – not ideal for UK sponsors nor UK pension investments.
The scale of pensions deficits also created some alarming headlines last year. However, some schemes also saw the first “good news” in funding terms for a number of years and there are signs of a number of them are getting closer to, or even hitting, that magical buyout funding level. There will be some tough conversations between trustees, sponsors and the Regulator in 2018, but with the right approach and open, constructive communication, we believe the vast majority of schemes can reach the right answer to ensure their members receive their benefits over the long term, which is what we’re all here for!
On a positive note, it was good to see the number of people using auto enrolment surpass nine million for the first time, although as the percentage of salary an employee has to pay steadily increases, there is concern that more people will opt out. Only time will tell, but we will be watching what happens over the next 12 months or so to see if AR passes its first big test.
New for 2018
The British Steel savers fiasco will probably ensure that rules are tightened up on professional financial advisors so that people get the right advice – personalised to them from properly qualified advisors.
Annuities could be making a bit of a comeback if interest rates continue to rise and because the rule change on informing savers what they can get from rivals comes into force in March.
And finally, this year, we can expect publication of the DB white paper and this will be crucial for the industry as there may not be many more chances to get it right for the future.