Any permanent independent standing pensions commission will need to consider carefully its remit and structure is and how much accountability for policy decisions it would have, claims the latest briefing note from The Pensions Policy Institute (PPI).
It says following the Pensions Commission’s reports into pension reform, a number of organisations who have submitted alternative proposals have also suggested the introduction of an ongoing independent pensions commission or in the case of the Association of British Insurers (ABI), an economic regulator.
But although most suggestions for a ‘commission’ aim for some kind of research and commentary on pensions policy, the PPI says there is confusion as to what a commission would actually do, as it could serve a number of different functions.
The note has broken down the suggestions for various types of ‘Commissions’ from the ABI, the National Association of Pension Funds (NAPF), the Trades Union Congress (TUC) and the Pensions Management Institute (PMI) into four main groups.
Of these the “advisory” commission would provide a general policy overview based on expert research of trends and would monitor the effect of pensions policy and assess its long-term sustainability. Its role could also include setting out the future impact of policy choices on specific issues and could help better inform public policy debate and help build a consensus on difficult policy decisions.
The second, "making recommendations", type of commission has a more direct impact on policy by making recommendations to Government based on specific parameters, such as the state pension age or the minimum level of the state pension. Although this type of body would not make policy, the Government would be expected to have to explain why it didn’t follow its recommendations.
The third example is the type suggested by the ABI as an economic regulator, as a “setting policy” type body would have more direct impact on policy with executive power on certain issues such as setting the state pension age.
Finally a body set up just to provide “public information” on pensions would have a more general role and could provide financial education while increasing the public’s understanding of the need to save for retirement.
But while the decision on the type of commission seems straightforward enough, the PPI points out there are other design questions which need to be answered, such as would it have a permanent staff with an ongoing remit, or would it be a body which is reconvened every few years as part of a regular policy review.
The PPI claims if some kind of commission is to be set up as part of the pensions reforms, it needs careful consideration of the different aspects, with the governance, membership and reporting procedures in particular needing clarification.
It says while all the proposals stress the need for a pensions commission, in whatever form, to be independent from Government, the PPI points out it would also have to be independent from the pensions industry and other stakeholders.
The organisation says if it is to go ahead, careful thinking will be needed on its remit and organisation, and “most importantly the accountability for policy decisions, and its relationship with Parliament, would also have to be clarified.
The types of Commission proposed with existing examples provided by the PPI
|To report on long-term trends||Pensions Policy Institute|
Help the Aged
|To make recommendations to Government on pre-agreed parameters, such as what the state pension age should be||Low Pay Commission|
|To use prescribed policy tools to meet Government imposed targets||Monetary Policy Committee|
|Promoting the need to save, providing financial education||NZ Retirement Commission|
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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