The new Labour government needs to fast-track the implementation of the Defined Benefit (DB) Funding Code as one of its first priorities for the pensions sector, according to the Pensions and Lifetime Savings Association (PLSA).

Nigel Peaple, director of policy and advocacy at the PLSA, told Pensions Expert that ratifying the code was “the most urgent thing” in the new administration’s in-tray.

The code needs to be signed off by parliament but this was delayed by the election, making it unlikely that it will be ready before the end of September when it was due to come into effect.

Peaple also highlighted issues including the abolition of the lifetime allowance and ongoing work on defined contribution (DC) decumulation options, both of which were implemented by the Conservative government but still need work.

The PLSA was supportive of the Department for Work and Pensions’ proposals to require schemes to offer guidance and product options at retirement, Peaple said.

“Ideally, we would hope that the DWP would press on with that rather than kicking it into the pensions review,” he said. “In the same vein, the work on value for money in DC – it makes sense to press on with it rather than waiting.”

Joined up thinking needed
New prime minister Sir Keir Starmer is in the process of appointing his cabinet and other positions, meaning the industry will soon be welcoming a new pensions minister. Liz Kendall has been appointed Secretary of State for Work and Pensions.

Some have flagged Sir Stephen Timms – former chair of the Work and Pensions Select Committee – as a potential candidate, but with more than 400 MPs, Labour has a deep pool from which to choose.

Peaple highlighted that the pensions minister role was not the only position of interest to the sector, given the potential scope of Labour’s review of the pensions system.

“For pensions, what will be interesting is not only who is the minister for pensions and the work and pensions secretary, but also who is in the Treasury – in particular the economic secretary to the Treasury,” he said.

“In the Labour manifesto, it said a pensions review would look at two things in particular: outcomes for savers, which can mean various things, and the link to supporting UK growth. It feels like the Treasury will have a strong interest in the pensions brief, as it has done over the past few years.

“I imagine it will be a joined-up approach between the two departments [the DWP and the Treasury].”

The pensions system review
Labour detailed as far back as February that it wanted to conduct a wide-ranging review of the pensions system, including auto-enrolment, DB and DC, and the Local Government Pension Scheme.

“It’s a good thing that [the government] is going to have a review as it can go into detail, look at the evidence – that will be the best way to ensure they come up with the right conclusions,” Peaple said.

One key aspect of the review is likely to be how to get pension schemes investing more in the UK economy – broadly in line with the previous government’s Mansion House Compact.

While the PLSA is supportive of this initiative, Peaple emphasised that investments always needed to be in the best interests of scheme members and savers.

“That can be a difficult message to get across at times,” he said. “I’ve had the chance to speak directly to Rachel Reeves, and it was gratifying that when I said we needed solutions that work for the country and for scheme members and savers, she agreed, which I thought was encouraging.”

 

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Published: July 5, 2024
Home » PLSA calls for government focus on DC decumulation, Funding Code
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