The Government last night debated, and rejected, key changes to the Pension Schemes Bill proposed by Labour. These included:
• Requiring the Government to automatically book Pension Wise appointments for people from their 50th birthday
• Creating an objective for occupational pension schemes to achieve ‘net zero’ carbon dioxide emissions by 2050 or sooner
You can see details of the debate here: https://hansard.parliament.uk/commons/2020-11-16/debates/298AA028-D49E-4F07-A001-C483ADF38659/PensionSchemesBill(Lords)
Tom Selby, senior analyst at AJ Bell, comments:
Auto-enrolment into retirement guidance
“Increasing take-up of retirement guidance is the right goal and one which is shared across the pensions industry.
“Pension freedoms have opened up huge flexibility to savers but also present difficult and often complex choices, from understanding the tax rules to managing withdrawals sustainably. With the majority of people choosing to make retirement decisions without advice, guidance has a pivotal role boosting people’s understanding of the retirement landscape.
“However, there has been debate about the most appropriate time to point people towards guidance, with some arguing for a ‘nudge’ and others preferring an auto-enrolment ‘shove’.
“In the event, the Government decided to stick with its ‘stronger nudge’ plans and rejected Labour’s amendment, which would have required the DWP to automatically enrol members into a guidance appointment from their 50th birthday. In addition, Labour’s proposal would have required an appointment be rebooked each year until guidance had been taken or the person had chosen to opt-out.
“Policymakers are attempting to strike a balance here between boosting take-up of valuable retirement guidance while ensuring people who want to access their own money are not impeded in doing so.
“Creating a system to book guidance appointments on behalf of millions of people would also have been a huge administrative task which would undoubtedly have come with significant costs for the Exchequer. This likely had a significant bearing on last night’s decision given the pressures placed on public finances by Coronavirus.
“As the ‘stronger nudge’ reforms are taken forward, it will be important to consider how and when to prod people towards guidance, taking into account people’s motivations and behavioural responses at different stages of the retirement savings journey.”
Climate change target for pension schemes
“Tackling climate change and moving towards a more sustainable way of living is one of the key public policy challenges facing Governments around the globe in 2020.
“The way our pensions are invested can have a huge impact on society, and it seems inevitable – regardless of this amendment being rejected – that workplace pension schemes will increasingly shift towards an approach which places environmental, social and governance (ESG) issues at the forefront.
“We are also seeing this shift reflected in the choice of investments made available to individual investors, with providers looking to offer ESG options for people who want to use ensure their savings make a positive impact on the world we live in.”
