Consensus on its pension reforms has been very important to the Government. It's worked hard to maintain the support of other political parties, the pensions industry and consumers.
It doesn’t want crucial changes overturned on a change of Government or torpedoed by dissatisfied factions.
The announcement that automatic enrolment into group personal pensions (GPPs) will be available under the Personal Accounts regime demonstrates the power of consensus.
This is an enormous step in ensuring a level playing field for companies with good existing pension arrangements looking for exemption from offering Personal Accounts. The alternative was an unsatisfactory fudge.
A straightforward exemption for GPPs without automatic enrolment might be considered an easy way for employers to reduce take-up by staff. But if there were additional exemption criteria for GPPs, such as minimum take-up rates, employers could abandon good existing arrangements and offer Personal Accounts with reduced contribution rates. This was a potential deal-breaker. Consensus was vital in breaking the deadlock.
A letter supporting automatic enrolment was sent to the European Commission signed by the CBI, ABI, EEF, NAPF, TUC, Which?, Help the Aged, Age Concern and the Equalities and Human Rights Commission. That’s a powerful consortium, representing a very wide range of stakeholders. It must have given the EC confidence that its agreement wasn’t going to create any consumer detriment.
All involved deserve credit, and perhaps especially the ABI for its key role in building the consensus and in ensuring that key issues were identified and addressed. And let’s not forget the Government. Approaching the EC took some courage, because a negative answer could have extended beyond GPPs and threatened the whole reform process.
It may be coincidence, but this resolution followed the return to DWP of James Purnell, one of the most switched-on and pragmatic pensions ministers we’ve had in recent years. So well done all round. Another major issue bites the dust. This should give renewed impetus to tackling the others including the finances of Personal Accounts, the definition of pensionable earnings for exempt arrangements and the impact of means-testing. Now, if we could get consensus on that one…
Ian Naismith is head of pensions development at Scottish Widows
The views expressed in this blog are those of the individual.IFAonline
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