The decision to ‘downgrade’ the role of pensions minister places future policy developments at risk, ex-minister Ros Altmann has warned.
Altmann quit the role of minister of state for pensions on Friday and has been replaced by Watford MP Richard Harrington.
Harrington’s job title is ‘parliamentary under-secretary of state for pensions’ which is the lowest of three tiers of government minister in the UK below minister of state and secretary of state.
Harrington joined the Department for Work and Pensions (DWP) on 17 July having previously been under-secretary of state for Syrian refugees.
Altmann (pictured) said the decision to downgrade the position “could pose threats to future pensions and we must be alert to the dangers”.
She said: “Pensions are vital for the long-term future of millions of people in our country. We are in the middle of a major programme of reform and it needs to be guided carefully, otherwise there are dangers that pensions policy could be derailed.
“If the downgrading of ministerial responsibility in DWP reflects a move to joined-up policy within the Treasury, then that would make some sense. But if it poses threats to major planks of pensions policy, then we should be very worried.”
Altmann, who will remain in the House of Lords after being made a Baroness after the last general election, said the latest Pensions Bill, auto-enrolment, defined benefit schemes and Pension Wise could all be affected.
However, she said she backed bringing private pensions policy under one roof.
“Last week I suggested to Number 10 that I would be delighted to help the new government with a radical overhaul of pensions policy responsibility. This could see all private pensions policy joined together in one place, under a minister in the treasury, while state pension policy stays within the DWP,” said Altmann.
“I think it makes sense for private pension savings policy to be run in one place, rather than being split across departments. I would have been happy to do that in the new government but only based in the Treasury, not the DWP. I wonder if there may be a move in that direction?”
Another ex-pensions minister, Steve Webb, also weighed in on the news.
Webb, who is now Royal London director of policy Steve Webb, said: “The decision by the DWP to make the role of pensions minister a junior ministerial post is a shock.
“The DWP is responsible for overseeing the automatic enrolment of ten million workers into workplace pensions, for policy on the multi-billion pound deficits in company pension funds, for making sure that the new ‘pension freedoms’ work effectively and many other pension issues which affect the lives of millions of today’s workers and retired people.
“These issues should be a central concern for the department.
“The seniority of ministers really does matter, not least in dealings with other government departments such as the Treasury.
“The DWP has lost a powerful voice in fighting the corner of workplace pensions with the resignation of Ros Altmann. This new decision is a demotion for pensions and sends a worrying signal to all who are concerned about the long-term financial health of the nation”.
Altmann’s concerns
Pensions Bill
The recent Queen’s Speech contained a provision for a Pensions Bill, which I fought really hard to obtain. It is designed to protect pensions. Currently, people’s pensions are at risk if the trust-based DC pension scheme they are saving in winds up. I do hope the new government will not put these important measures on hold. Members’ pensions are not safe and the protections should have been put in place long ago, they are urgently required.
The new Bill would also introduce a cap on the exit charges on members’ funds when they want to move from one scheme to another. At the moment, members can lose over 5% of their money just because they need to move scheme. The new law would cap those charges at much lower levels.
Auto-enrolment
Currently, policy responsibility for auto-enrolment lies in the DWP. If the Treasury takes this over, there are risks to the programme. Auto-enrolment is working really well, as millions of workers are saving in pension schemes for the first time, with the help of their employer. We are establishing as the norm that every employer is expected to provide a pension for their staff. This is a major change but is an essential part of the radical pension reforms that are underway.
The new state pension will have no more earnings-related elements building up, so all the earnings linked retirement income must come from private pensions or other assets. We must not let the EU referendum fallout derail this vital programme.
Defined benefit schemes
At the moment, the DWP is responsible for our system of pension protection and there are over 11 million workers saving in defined benefit schemes who need a robust protection framework.
Funding levels of many schemes have deteriorated sharply, despite employers putting significant sums into them, and the government urgently needs to address the challenges facing trustees and employers in connection with meeting their pension promises.
Work is already underway in the DWP but it is complex and needs careful handling. A new pensions minister needs to engage with this work and manage the issues surrounding the British Steel pension consultation and the knock-on effects on all other schemes.
Pension Wise
Responsibility for Pension Wise recently moved from Treasury to the DWP, to ensure all publicly provided pensions guidance is located in one place. As DWP was already responsible for The Pensions Advisory Service (TPAS), it made sense to put Pension Wise and TPAS together and form a new guidance body to help people engage with planning their later life income.
This was also due to be in the new Pensions Bill and I do hope it goes ahead, even if based within Treasury again, rather than DWP. The public need help and guidance to understand how to plan their retirement income and customer satisfaction with the Pension Wise service has been very high. The new government must not let this be a casualty of the recent political upheavals.
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