The recent reshuffle meant a whole host of new ministerial faces both at the Treasury and the Department for Work and Pensions (DWP). These new ministers will have a full agenda when it comes to pensions.
At DWP, the new secretary of state is Damian Green, who will be responsible for controlling welfare spending and getting people back to work. Much day-to-day work on pensions will therefore fall to the new incumbent, Richard Harrington.
His first priority will be overseeing the 2017 review of automatic enrolment. The programme of requiring firms to put workers into a workplace pension has been hugely successful so far. But a review is needed because even when the process is complete in 2019, most workers will still be saving far too little for their retirement.
The government needs to find a way to get workers to step up their pension contributions – perhaps each time they get a pay rise – but in a way that does not drive up opt-out rates. The 2017 review also needs to look at the key groups who are excluded from automatic enrolment, notably Britain’s ‘forgotten army’ of over 4.5 million self-employed people, many of whom have shockingly low levels of pension provision.
A second big issue in the ministerial in-tray will be the review of the state pension age, currently being undertaken by former CBI chief John Cridland. By law, the state pension age has to be reviewed every five years, and further increases to working lives can be expected in order to catch up with growing life expectancies.
In a post-Brexit world where there are perhaps far fewer economic migrants of working age, we may face labour market shortages which will require more of us to work for longer in future.
But the biggest pensions issue is one that does not come within the scope of the DWP at all, and this is the future of pensions tax relief. Last year the Treasury ran a consultation on options for tax relief but in the end backed off making changes, not least to avoid a political row in the run up to the European referendum.
But the issue has not gone away. The temptation for ministers will be to continue their recent habit of seeing pension tax relief as a ‘cash cow’ to be dipped in to every couple of years for another billion pounds or so.
But what is really needed is a cool long-term approach which will generate a fair and simple system which then stands the test of time and is not subject to annual tinkering.
This was a challenge which defeated the previous ministerial team, so let us hope that their successors do a better job.