After a year of mixed fortunes for the pensions sector, Ian Bell, RSM’s head of pensions, looks ahead to what 2017 has in store:
The spectre of the BHS debacle will loom large in 2017
The fall-out from BHS will continue into 2017 and beyond. While we are likely to see some payment being made to the BHS pension scheme, we can also expect more action from the regulator to drive up standards of governance and trusteeship. We already know that during 2017, TPR will undertake a targeted education and enforcement drive. We could also feasibly see moves towards reforming the Takeover Code to introduce some form of clearance focused on pension funding prior to a merger being allowed to proceed.
LISAs will be a big hit but at what cost?
There will be a large take-up for the new LISA when it launches in April 2017, and the Government will no doubt want to trumpet the early success of the scheme. What is much less clear is how much the scheme will actually cost the Exchequer – something that may only become clear in many years to come. However, what we can expect is a great deal of confusion among savers, with many opting to deposit spare cash in their LISA rather than in their pension. Whether this turns out to be a wise decision, and how many people will get stung by the punitive withdrawal penalties when their circumstances change, will remain to be seen.
Auto-enrolment review will find room for improvement
The recently announced review into auto-enrolment will likely find that although the scheme has led to 10 million people newly saving or saving more, pension contributions from employees and employers will have to rise further to ward off the threat of pensioner poverty. We can also expect a much greater focus on pension provision for the growing army of self-employed and gig-economy workers.
Consolidation of the master trusts
The final stages of the smallest employers entering auto enrolment and the ramping up of the governance requirements facing master trusts is likely to lead to consolidation in the sector. This has been widely predicted from the outset and master trusts will now be revisiting their business plans on the back of the business that they have won compared to their future running costs. The need for increased scale will be the conclusion of many and we could feasibly see the number of master trusts falling to 10 or less in the foreseeable future.
Cyber-security issues for pensions dashboard
In spring, we will get our first glimpse of the pensions dashboard. This innovation has real potential to encourage people to think more carefully about preparing for their retirement. However, the dashboard could also be a target for cyber-criminals intent on finding out who’s got what and where. The security must therefore be watertight for the scheme to launch successfully.
Last call for the boiler room scammers
At the Autumn Statement, the government announced a consultation on options to tackle pension scams, including banning cold calling in relation to pensions. This will take some time to work through the system, so we can expect the boiler room scammers to continue to make hay while the sun is still shining. Everyone involved in the pensions sector should be alert to this in 2017, and work together to make sure the vulnerable aren’t relieved of their life savings.